Can a Collection Agency Come After You for the Rest? One of the most common inquiries we receive at Credlocity is whether a collection agency can chase a debtor for the remaining balance of a collection account after a settlement is reached. For instance, if you receive a letter saying you owe $900, but the agency agrees to settle for $300, can they later come back and demand the remaining $600? The short answer is no, and this blog will delve into the reasons and the protective laws in place to safeguard consumers.

Understanding Debt Collection and Settlement Before we dive into the nitty-gritty, it’s crucial to understand how debt collection and settlement work. When you default on a debt, your original creditor might assign or sell the debt to a collection agency. The agency then contacts you to retrieve the money. Sometimes, to expedite the process, they might offer to settle the debt for less than you owe. The Binding Nature of Debt Settlement When a settlement agreement is reached, it becomes a legally binding contract. In our example, if you agreed to pay $300 to settle your debt, that means the collection agency has agreed to accept this amount as full payment. Legally, they cannot come back to you asking for the remaining $600. The Fair Debt Collection Practices Act (FDCPA) The Fair Debt Collection Practices Act (FDCPA) is a federal law that governs how debt collectors can conduct business. According to the FDCPA, once a debt is settled, the agency is prohibited from trying to collect any more money related to that debt. If they do so, they are violating the FDCPA, which could result in legal consequences.

The Role of Written Agreements To ensure your protection, always get the settlement agreement in writing. Having a written agreement makes it easier to prove that a settlement was reached if the collection agency later tries to collect more money. If this happens, you can use the agreement as proof of the settlement and file a complaint with the Consumer Financial Protection Bureau (CFPB) or your state’s attorney general.

What to Do if a Collection Agency Violates the Agreement If a collection agency violates the agreement and asks for the remaining balance of a settled debt, you should:

  1. Provide a copy of the settlement agreement, indicating that the debt was settled and no further collection attempts should be made.
  2. File a complaint with the CFPB or your state’s attorney general.
  3. Consult with a consumer rights attorney or a debt defense lawyer.

Final Thoughts Understanding your rights when dealing with debt collection agencies is crucial to maintaining financial health and stability. Knowledge of these laws helps you stand your ground and ensures you’re treated fairly. Remember, once a debt is settled, a collection agency cannot come after you for the remaining balance. At Credlocity, we are committed to helping you understand your financial rights and responsibilities. If you have any questions or need assistance, don’t hesitate to reach out to us. Written by Joeziel Joey Vazquez, CEO of

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