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Debt collection key terms

Credit counselor

Credit counselors can help with the following:

  • Advise you on managing your money and debts
  • Help you develop a budget
  • Usually offer free educational materials and workshops

Typically, credit counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. 

Debt Collection Rule

The CFPB issued “rules” effective on November 30, 2021 that clarify and interpret the federal Fair Debt Collection Practices Act (FDCPA).

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Debt collector

Under the federal Fair Debt Collection Practices Act, a debt collector generally is a person or a company that regularly collects debts owed to others, usually when those debts are past-due.

Debt collectors include collection agencies or lawyers who collect debts as part of their business. There are also companies that buy past-due debts from creditors or other businesses and then try to collect them. These debt collectors are also called debt collection agencies, debt collection companies, or debt buyers.

Debt settlement (relief) services

Debt settlement companies are companies that say they can renegotiate, settle, or in some way change the terms of a person's debt to a creditor or debt collector. Dealing with debt settlement companies can be risky.

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Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) is the main federal law that governs debt collection practices. The FDCPA prohibits debt collection companies from using abusive, unfair or deceptive practices to collect debts from you. Read more information on your rights under the FDCPA.


A wage or bank account garnishment occurs when a creditor takes a portion of your paycheck or money from your bank account to collect money you owe. Garnishments generally require a court order that results from a judgment. However, certain debts owed to the government may also result in garnishment, even without a judgment.

State and federal laws have limits or “exemptions” that apply to bank account and wage garnishments, usually to make sure you have something left to live on. It is also a violation of the Fair Debt Collection Practices Act (FDCPA) for a debt collector to threaten that your wages will be garnished if your wages cannot legally be garnished.

Harassment by a debt collector

The Fair Debt Collection Practices Act (FDCPA) says debt collectors can't harass, oppress, or abuse you or anyone else they contact.

Harassment by a debt collector can come in different forms. Examples include repetitious phone calls that are intended to annoy, abuse, or harass you or any person answering the phone; obscene or profane language; threats of violence or harm; publishing lists of people who refuse to pay their debts (this does not include reporting information to a credit reporting company); and calling you without telling you who they are.


A judgment is an official result of a lawsuit in court. In debt collection lawsuits, the judge may award the creditor or debt collector a judgment against you. If you don’t respond to a legal complaint, you will lose your chance to defend yourself and you may find that a judgment is entered against you.

If someone sues you, or if someone has obtained a judgment against you and you are unsure of what to do, talk to an attorney. Some attorneys may offer free services or charge a reduced fee. There may also be legal aid offices or legal clinics in your area who will offer their services for free if you meet certain criteria. Servicemembers should consult their local JAG office .

Limited-content message

Under the Debt Collection Rule, this is a voicemail message to a consumer that must contain certain required information and may contain other optional content.

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Original creditor

Generally speaking, the original creditor is the company that gave you the loan or credit. An original creditor may attempt to collect a past due credit account itself, or it may hire a debt collector. The original creditor also may sell your credit account to a debt collector. A debt collector is a generally a third party who has been contracted specifically to collect on your account, or someone who has purchased it from the original creditor or another debt collector or debt buyer. 

Statute of limitations

A statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a debt. Most statutes of limitations fall in the three to six years range, although in some jurisdictions they may extend for longer. Statutes of limitation may vary depending on state laws, the type of debt you have, or the state law named in your credit agreement.

Validation notice

A debt collector is required to provide certain information when it first communicates with a consumer, or shortly after. When the debt collector provides this required information electronically or in writing, it is called a validation notice.