Lainie is a freelance writer specializing in business and legal topics. She holds a master's degree in library and information science.
Can a collection agency find my accounts?
A collection agency does not have the power to check the balances of your bank accounts or seize funds unless it wins a judgment against you. Unless you receive a court order to disclose financial information, you are under no legal obligation to cooperate with a collection agency’s attempts to collect a debt.
A collection agency is a business that specializes in collecting debts. Some collection agencies work on behalf of other businesses and receive a commission for whatever money they collect. Other collection agencies operate as debt buyers: They purchase old debts from original creditors for a small percentage of their value and then try to collect them. The debt buyer keeps the entire amount that it collects.
If a creditor assigns or sells one of your debts to a collection agency, the agency's bill collectors will contact you by phone and postal mail. The collectors may initially attempt to persuade you to pay the debt in full or offer you a payment plan. If you are unable or unwilling to repay the debt, the collector may also offer to settle the for less than what you owe.
Depending on the circumstances, a collection agency may file a lawsuit against you as a way of collecting the debt. If the collection agency wins, it can ask the court to levy your bank account, file a lien on your property, or garnish your wages.
Regardless of tactics used, many debt collectors do report your accounts to credit bureaus. These reports can negatively affect your credit history and score.
Third party contacts
The federal Fair Debt Collections Practices Act restricts the types of communications a debt collector can have with others about your debt. While it is legal for a debt collector to contact others in an attempt to locate you, the collector cannot discuss your situation unless the conversation is with your attorney or spouse.
Debt collection tactics exposed
Judgments and levies
If you cannot repay the debt, or refuse to do so, the collection agency may take you to court. If it wins its case, it can take additional measures to collect the debt, including seizing funds from your bank and investment accounts. A sheriff or other law enforcement official usually carries out this process, known as a “levy” or a “garnishment”. The collection agency brings a copy of the court judgment to the sheriff’s office, along with information about your bank accounts, and asks the sheriff to serve the garnishment or levy to the bank. Once this happens, your bank freezes your funds and turns them over to the sheriff. This process may be repeated as many times as is necessary to pay off your debt.
Locating bank accounts
Collection agencies have several ways of finding out about your bank accounts and use this information when attempting to garnish or levy funds. If you ever paid your original creditor using a paper check or bank draft, the creditor can provide this information to the collection agency. Similarly, if you ever made any payments to the collection agency using bank checks or drafts, the collection agency may use this information to garnish your funds. The collection agency may also subpoena you to court to complete a financial disclosure form while under oath. This disclosure form asks you to list any bank accounts that you have, along with other assets so that the collection agency can begin to seize them.
Useful debt collection links
- Debt Collection FAQs: A Guide for Consumers
Information from the Federal Trade Commission on debt collection laws in the United States.
Lainie Petersen (author) from Chicago on July 14, 2012:
Many thanks for your feedback, Monica!
monicamelendez from Salt Lake City on July 14, 2012:
I wish I had known a lot more about the collection process a few years ago. I was constantly dealing with creditors. You've got some great advice in this hub, thank you!
Lainie Petersen (author) from Chicago on August 24, 2011:
Thanks for your feedback and support, Funmontrealgirl!