Answer: 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 also have consumer laws that speak to full disclosure.
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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.” Because you agreed to credit terms that included the above statement, most creditors send monthly statements with an “amount due” highlighted somehow. When your account is delinquent, and your regular statement shows the past due amount, consider yourself notified! Many creditors, as a courtesy, send 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 send a separate notice or call you before sending a delinquent 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. An exception to this would be if the disclosure statement calls for the creditor to notify the co-signer. If you plan to co-sign for a loan, make sure the terms of agreement include notifying you before the account is sent to collections.