Generally creditors are not required to notify debtors that
they intend to turn over or send a delinquent account to collections. Many
consumers mistakenly believe that their creditor is somehow obligated to tell
them about collection action before they can send the account to collections.
However, the
Truth
in Lending Act and the Uniformed Commercial Code (UCC) requires any credit
contract to come with a full disclosure statement that clearly spells out the
terms of the contract. Many states have consumer laws as well that speak to
full disclosure.
The only exception to notifying you before sending a
delinquent account to collections is if the disclosure statement or credit
contract calls for it. Most statements expressly exclude any
notifications except as a courtesy.
Most creditors send monthly statements with a bill attached or
included. If your debt is past due and you receive a regular statement showing
the past due amount, consider that notification that your account can be sent
to collections. Look at your credit disclosure statement for words similar to
these:
"If I fail to pay the amount that you think I
owe, you may report me as delinquent and send the account for collection
action."
Notice there is nothing that says they must notify you.
Unless the disclosure statement says it, they don't have to do
it. Many creditors will, as a courtesy, send you a reminder or two of
the past due debt and include a note that says the account will be sent to
collections if you do not pay by a certain date.
Bottom line: Creditors do NOT always have to tell you
before sending an account to collections.
This includes co-signed credit contracts as
well. If the primary borrower defaults, the account can be immediately sent to
collections without notifying the co-signer. Again, the exception is if the
disclosure statement calls for the creditor to notify the co-signer.