Yes, a collection agency can sell your debt to another company. It’s completely legal—and actually pretty common. But if it happens to you, it can be confusing and frustrating, especially if you suddenly start hearing from a new collector you’ve never dealt with before.
In this article, we’ll break down why debts get sold, how it affects your credit report, and what your rights are under the Fair Debt Collection Practices Act. You’ll also learn how to deal with a new collector, how to dispute errors, and how to settle old debts without making things worse.
Key Takeaways
- Collection agencies can legally sell your debt under the Fair Debt Collection Practices Act. They often do this to cut losses, manage resources, or shift focus to more collectible accounts.
- When your debt is sold, the new agency must follow the same FDCPA rules. You’ll get a notice about the transfer, and your credit report may reflect both a charge-off from the original creditor and a new collection entry.
- To protect yourself, keep records, be aware of your payment options, and know the statute of limitations in your state. If your rights are violated, consider speaking with an attorney.
What is a collection agency?
A collection agency is a company that collects unpaid debts on behalf of creditors or buys debts outright. When an account goes unpaid for too long, the original lender may stop trying to collect and bring in a collection agency instead.
Some agencies, like Midland Credit Management or Portfolio Recovery Associates, buy large portfolios of old debt—usually for pennies on the dollar—and try to collect the full amount. Others simply collect on behalf of the original lender for a fee.
How Debt Collection Works
Collection agencies typically purchase debt from original creditors at a discounted price. This allows the original creditor to recover a portion of the outstanding debt while passing the responsibility of collecting the remaining balance to the collection agency. Once the debt has been transferred, the collection agency will attempt to collect payment from the debtor.
What It Means When Your Debt Is Sold
When a collection agency sells your debt to another agency, a few important things change—but your legal rights stay the same.
You’ll start hearing from a new debt collector. They may have a different tone, approach, or payment policy. Some might be more aggressive, while others are more open to negotiation. You should get a notice from the new agency explaining the transfer and how to contact them.
Your credit report will reflect the change. The original creditor will usually list the account as charged off, while the new owner reports it as a collection account. If the debt is sold more than once, multiple entries can appear, which may further lower your credit score.
What doesn’t change is the amount you owe or your rights under the Fair Debt Collection Practices Act. The new collector must follow the same rules: they can’t harass you, must validate the debt if you ask, and have to honor any limitations on when and how they contact you.
Why Collection Agencies Sell Debt
Debt collectors don’t always hold onto accounts forever. If they believe an account isn’t worth the effort—or they want to improve cash flow—they may sell it to another agency. Here’s why that happens:
- To recover money quickly: Debt buyers pay a small fraction of the balance, giving the current owner a fast return instead of waiting on uncertain payments.
- To reduce overhead: Maintaining large volumes of unpaid accounts takes time, staff, and money. Selling off older or harder-to-collect accounts frees up resources.
- To focus on high-probability accounts: Agencies may offload older or disputed debts to concentrate on accounts they’re more likely to collect.
- To manage legal risk: If a debt is approaching the statute of limitations, selling it shifts the compliance burden to another agency.
What Happens When Your Debt Is Sold
Once your debt is sold, the new owner takes over collection efforts—and you’ll usually get a letter letting you know who now holds the account.
This new agency must follow the same rules as the last one under the Fair Debt Collection Practices Act. That means they must validate the debt if you request it, and they can’t harass you or contact you at unreasonable hours.
Even though the collector has changed, your responsibility to pay the debt remains the same. The amount owed doesn’t reset, and the clock on the statute of limitations doesn’t restart.
See also: Debt Validation Letter Template to Stop Collectors Fast
How Sold Debt Affects Your Credit Report
When your debt is sold, it often results in more than one negative entry on your credit report.
The original creditor will typically mark the account as charged off, which signals they’ve stopped trying to collect. Then, the collection agency that buys the debt will create a new entry for the same balance as a collection account. If the debt is sold again, another agency may report its own collection entry—leading to multiple records tied to the same original debt.
This can do more damage to your credit score, especially if the new collection entry resets the date of last activity (which it shouldn’t, but sometimes does). Always check your credit reports for accuracy and dispute any duplicate or incorrect listings.
How to Dispute Credit Report Errors
When debt gets sold, your credit report can get messy—especially if multiple collectors report the same account. It’s your job to catch and correct those errors.
What to Look For
Check your credit reports from Equifax, Experian, and TransUnion. Common issues include:
- Duplicate listings for the same debt
- Incorrect balances or account statuses
- Accounts that should have aged off
How to File a Dispute
If you find an error, file a dispute with each credit bureau. You can do this by mail with a written dispute letter or online. In your letter, be direct. For example:
“This account appears to be a duplicate of a debt already reported by another collector. Please investigate and remove any inaccurate or redundant entries.”
Credit bureaus are required to investigate and respond within 30 days. Always keep copies of your letters and any supporting documents.
Know the Limits
The statute of limitations only affects whether a collector can sue—it doesn’t erase the debt or remove it from your credit report. You can still use the age of the debt as leverage in disputes or negotiations, but don’t expect it to disappear automatically.
See also: How to Remove Collections From Your Credit Report
How to Settle a Sold Debt on Your Own
Negotiating a settlement yourself can save you money—if you’re prepared. Most collection agencies are willing to accept less than the full balance, especially if the debt is old or already bought at a discount.
Start by reviewing your finances and deciding how much you can afford to offer. Many successful settlements land between 30% and 60% of the total owed.
When you’re ready, use a short and respectful script like this:
“I’d like to settle this debt. I can offer [$amount] as a lump sum if you agree to consider the account paid in full and stop all collection activity.”
Get everything in writing before sending money. Ask the collector to confirm:
- The amount you’ll pay
- That the account will be closed and marked “paid in full” or “settled”
- That no further collection efforts will occur
Always keep copies of letters, agreements, and payment receipts in case of future disputes.
Should you use a debt settlement company?
Debt settlement companies negotiate on your behalf—but they charge fees, often 15% to 25% of the enrolled debt. They may also ask you to stop making payments while they negotiate, which can further damage your credit score.
There’s no guarantee your creditors will accept a settlement through a third party. And if they do forgive part of your debt, the IRS may consider the forgiven amount taxable income.
If you feel overwhelmed or are juggling multiple debts, a settlement company could be an option—but weigh the costs carefully before signing up.
Your Rights Under the FDCPA
The Fair Debt Collection Practices Act gives you important protections when dealing with collection agencies. Here’s what debt collectors can’t do:
- Call before 8 a.m. or after 9 p.m.
- Contact you at work if you ask them not to
- Harass, threaten, or use abusive language
- Lie about who they are or how much you owe
- Ignore your written request to validate the debt
You can request written verification of the debt at any time. Once you ask, the collector must stop contacting you until they provide proof that the debt is real and that they have the right to collect it.
How to Handle Debt Collectors
Here are some simple rules to protect yourself:
- Don’t ignore them: It won’t make the debt go away and could lead to legal action.
- Stay calm and keep records: Write down the date, time, and summary of every call. Save all letters.
- Don’t admit to the debt right away: If it’s old or inaccurate, saying the wrong thing could restart the clock on the statute of limitations.
- Ask for everything in writing: This includes payment plans, settlement offers, and account details.
- Know when to walk away: If a collector violates your rights, hang up and consider filing a complaint with the Consumer Financial Protection Bureau or contacting an attorney.
Bottom Line
Yes, collection agencies can legally sell your debt—and it happens more than most people realize. But that doesn’t mean you’re out of options or out of rights.
If your debt is sold, the new agency must still follow the rules set by the Fair Debt Collection Practices Act. Your credit report may show multiple entries, but you have the right to dispute anything that’s inaccurate or outdated. And in many cases, you can negotiate a lower payoff—either on your own or with help.
The key is to stay organized, get everything in writing, and know where you stand. The more informed you are, the more control you’ll have in dealing with debt collectors and protecting your credit.
