Collections and Debt Settlement


If you owe money on credit cards, a personal loan, a financed or leased a car, or a home mortgage, you are a “debtor.” The company that you owe money to is the “creditor.” Debt collectors and collection agencies are the companies that try to collect the money owed by debtors. Some collection agencies may use deceptive or illegal practices to collect debts. 

Typically, a debt collector will purchase debt from the original creditor for pennies on the dollar and then attempt to collect a larger amount of money from the debtor. Although many debt collectors are pushy and pressure consumers to pay more money faster, debtors have rights. The collection company must adhere to the Fair Debt Collection Practices Act.

In general, the Fair Debt Collection Practices Act provides that debt collectors:

  1. May not contact you before 8:00 AM or after 9:00 PM.
  2. Must only speak to you through your attorney if you are represented by one.
  3. May not contact you at work if the collection agent knows or should know that your employer prohibits such calls.
  4. May not contact individuals, such as friends and family, more than a single time, and the contact is limited to requests for your contact information.
  5. Must send a written “validation notice” telling you the amount you owe within five days after they first contact you. This notice must include the name of the creditor to whom you owe the money, and how to proceed if you don’t believe that you owe the money.
  6. May not contact you if you have informed the collecting agent that the debt is not yours.
  7. May not make threats of any kind; including arrest, garnishment of wages, and property seizure.
  8. May not make false, deceptive, or misleading statements in an attempt to collect a debt.

Collection Scams

Not all companies that claim to be debt collectors are real debt collectors. Some companies may contact people claiming they are collecting a debt, when there is no debt owed. They threaten lawsuits or arrest if payment is not made immediately. If you do not believe you owe the alleged debt, or suspect that you may not owe it, request a “validation notice” or something in writing showing the source of the debt. Scam collectors will seldom respond. Knowing your rights can protect you from this type of scam.

Debt Settlement

Many different kinds of services claim to help people with debt problems. Among them are “debt settlement” companies that say they will negotiate with your creditors to reduce your debt to less than what you currently owe.

There is no guarantee that debt settlement companies can persuade a creditor to accept partial payment of a debt, and the negotiation process may take a long time. If you decide to hire a debt settlement company to negotiate debt relief on your behalf, make sure to keep a few things in mind:

  1. Debt settlement companies selling their services by telephone cannot charge or collect a fee before they settle or reduce your debt.
  2. Be sure to obtain a copy of and thoroughly review the debt settlement company’s terms, fees, and policies.
  3. If you set up an account to deposit funds for possible settlement and fees, make sure the account is administered by an independent third party. This is called an “escrow” account.
  4. Debt settlement companies are required to tell you how many months or years it will take before they will make an offer to each creditor, and they must tell you how much money you need to pay into escrow before they will make an offer to each creditor.
  5. Beware any debt settlement program that touts a “new government program” to bail out personal credit card debt, or promises that you will only pay “pennies on the dollar.”
  6. Beware any guarantees that the company will “make your unsecured debt go away” or “stop all debt collection calls and lawsuits.”

Do not stop making payments to your creditors without first considering the additional late fees, interest, and damage to your credit that may occur. 

Been scammed?
File a complaint today.

The Attorney General’s Office is here to help. If you believe you are the victim of a consumer scam or fraud, file a consumer complaint online right now. You can also call:

Phoenix: (602) 542-5763

Tucson: (520) 628-6648

Outside metro areas: (800) 352-8431

Bilingual consumer protection staff is available to assist.