How to Send an Account to Collections: A Step-by-Step Guide

Confirm the debt is valid and overdue, send a final notice, gather your contract, invoices and contact history, choose a collection agency or attorney that handles your debt type and the debtor's state, sign a written agreement, and send the file. Then tell the agency about any payments or disputes while it works the account.

It means handing an unpaid debt to a third party, usually a collection agency or collection attorney, to collect on your behalf. You normally still own the debt. The agency contacts the debtor and keeps an agreed share of what it recovers. Selling the debt to a debt buyer is different, because then you no longer own it.

The agency reviews your file, then contacts the customer by letter, phone, email or text, within the law. For consumer debts it must give the consumer validation information, such as the amount owed, an itemization and dispute rights, in its first communication or within five days after it (12 CFR 1006.34). It negotiates payment or a plan, remits what it collects minus its fee, and may recommend legal action if the customer won't pay.

Yes. A business that is owed a valid debt can generally place it with a collection agency or collection attorney. The agency must follow federal and state collection laws, including the FDCPA for consumer debts (15 U.S.C. §1692 et seq.), and many states license collection agencies. B2B debts generally fall outside the FDCPA but can still be subject to state rules.

Yes. An unpaid invoice is one of the most common things businesses place with a collection agency. It helps to have the invoice, the agreement or purchase order, proof of delivery and your payment requests. A written contract helps, but agencies can also work invoices backed by other evidence of the order and delivery.

There's no general legal deadline to place an account with an agency, but waiting has costs. Older debts are usually harder to collect, and once the statute of limitations runs, collectors generally can't sue or threaten to sue on a consumer debt (12 CFR 1006.26(b)). Collection accounts generally can't stay on credit reports more than seven years, counted from 180 days after the delinquency began (about seven and a half years in total) (15 U.S.C. §1681c(a)(4), (c)(1)).

Generally there's no federal rule requiring a creditor to warn a customer before placing an account, but your contract or state law may require notice, and a final notice often gets the bill paid. If you're a financial institution (such as a bank or credit union) that reports negative information to the nationwide credit bureaus, you must notify the customer in writing, before or within 30 days after reporting (15 U.S.C. §1681s-2(a)(7)).

Yes. An agency can usually work an account with a name, address, phone or email, and the debt documents. No federal law requires an SSN to place an account. An SSN can help with skip tracing and credit reporting, but don't email it or put it in our form. Share it only through the agency's secure process. See skip tracing.

Collection agencies generally don't sue themselves. Lawsuits are filed by attorneys, and usually only with the creditor's approval when the balance and the debtor's ability to pay justify the cost. How often that happens varies by agency, debt type and balance, and there's no reliable public average. Ask each agency how and when it recommends legal action.

Yes, if it furnishes data to credit bureaus, but it must report accurately and correct errors (15 U.S.C. §1681s-2). For consumer debts, a collector generally can't report before it has spoken with the consumer or sent a letter or electronic message and waited a reasonable time for a bounce-back (12 CFR 1006.30(a)), and it must report a disputed debt as disputed (15 U.S.C. §1692e(8)). Not every agency reports, so ask.