7 min read · Last updated September 23, 2026
- When an account goes to collections, the original creditor either assigns it to an agency working on commission or sells it outright to a debt buyer who now legally owns it.
- The Federal Trade Commission (FTC) found that debt buyers paid an average of just 4.0 cents for every dollar of debt they purchased, across more than 3,400 portfolios it reviewed.
- Documentation proving exactly what’s owed often doesn’t travel with a sold debt: the FTC found buyers received any account documents for only 12 percent of the accounts in the portfolios it studied.
- Two separate clocks track an old debt: how long it can stay on a credit report under the Fair Credit Reporting Act (FCRA), and how long a collector can sue over it under a state statute of limitations, and the two run on different dates.
A debt in collections has either been assigned to an agency working on commission for the original creditor, or sold outright to a debt buyer who now owns it. Buyers typically pay just a few cents on the dollar of what’s actually owed. Two separate legal clocks then apply to that debt: a seven-year credit-reporting limit under the Fair Credit Reporting Act (FCRA), and a state statute of limitations on lawsuits. The two almost never run out on the same date.
In this article
- How a debt moves from a creditor to a collector
- What debt buyers actually pay, and why it shapes a settlement
- Why the paperwork often doesn’t follow the debt
- The two separate clocks running on an old debt
- Frequently asked questions
The Federal Trade Commission (FTC) found that debt buyers paid an average of just 4.0 cents for every dollar of debt they purchased, in a study covering more than 3,400 portfolios of charged-off accounts. That single number is the starting point for understanding why a $3,000 unpaid bill can sometimes be settled for a few hundred dollars. It’s also why the company calling about it may not be the one a person actually owed.
How a debt moves from a creditor to a collector
There are two very different things that can happen once an account goes unpaid long enough. The original creditor can assign it to a collection agency that works on a contingency commission, collecting a percentage of whatever it recovers, while the creditor still legally owns the debt. Or the creditor can sell the account outright to a debt buyer, who pays a price for it up front. That buyer now owns the debt itself, along with the right to collect it or resell it again.
When a debt is sold and later resold, the current owner has to be able to show a “chain of title.” That’s a documented history of each transfer reaching back to the original creditor, proving the current owner actually has the legal right to collect. Courts in a number of states now require debt buyers to produce that chain of title, along with an itemized accounting of the debt, before a collection lawsuit can proceed.
What debt buyers actually pay, and why it shapes a settlement
The FTC’s landmark study of the debt-buying industry found that price depends heavily on how old and how documented the debt is. Fresh, well-documented debt sold for far more per dollar than old, thinly-documented debt.
| Debt profile | Average price paid per dollar owed |
|---|---|
| Fresh credit card debt, under 3 years old, bought directly from the original creditor | 7.9 cents |
| Debt 3 to 6 years old | 3.1 cents |
| Debt 6 to 15 years old | 2.2 cents |
| Debt older than 15 years | Close to zero |
| All debt purchased, blended average | 4.0 cents |
That pricing is the real mechanism behind why a debt buyer will often accept a settlement far below the balance shown on an account. A buyer who paid 2 to 8 cents on the dollar can still profit handsomely by recovering just a fraction of what’s owed. Almost anything collected is money the buyer never paid for in the first place.
Why the paperwork often doesn’t follow the debt
Federal rules and court requirements assume that documentation, the actual account records showing what was charged, when it was opened, and when it went unpaid, travels with a debt when it’s sold. In practice, the FTC’s review of real purchase data found a large gap between that assumption and what buyers actually received.
| Information about the account | Share of purchased accounts that included it |
|---|---|
| Outstanding balance owed | 100 percent |
| Date the account was originally opened | 97 percent |
| Date of the last payment made | 90 percent |
| Date the original creditor charged off the account | 83 percent |
| Date of the borrower’s first missed payment | 35 percent |
Data files are only half of what’s supposed to travel with a debt. The FTC separately reviewed the underlying paperwork itself, the actual account statements and agreements. In a review covering 333 portfolios and 3.9 million accounts, buyers received any real account document at all for only 12 percent of the accounts.
The gap matters most for the date of first default, the exact date that later determines how long the account can legally appear on a credit report. When that date wasn’t part of the sale, a buyer or a later collector may end up relying on a less precise date instead. That’s one reason a debt’s paperwork is worth requesting directly, rather than assuming it lines up with what a collector claims.
The two separate clocks running on an old debt
Two different legal limits apply to the same debt, and they don’t share a start date or an end date. The first is how long the account can stay on a credit report. Under the Fair Credit Reporting Act (FCRA), most delinquent accounts placed for collection can be reported for seven years. That seven-year period begins 180 days after the date the original delinquency started, not the date the debt was sold or charged off. Making a payment, or selling the account to a new owner, does not restart it.
The second is a state statute of limitations, the window a collector has to actually sue someone over the debt. This period is set by state law, typically runs three to six years though it can run longer in some states, and generally starts from the date of the last missed payment. Unlike the credit-reporting clock, this one can sometimes restart. In a number of states, making even a small payment or acknowledging the debt in writing resets the statute of limitations and gives the collector a new window to sue.
Because these two clocks run independently, a debt can be too old to sue over but still show up on a credit report. It can also still be legally collectible in court while no longer appearing on a report at all. Neither clock tells a person anything about the other one.
A collection account is also just one input into a much larger calculation. How a Credit Score Is Actually Built covers the mechanics behind the number that account is actually weighing down.
Frequently asked questions
What’s the difference between a debt being assigned and a debt being sold? An assigned debt is placed with a collection agency working on commission while the original creditor still owns it. A sold debt changes legal ownership entirely, and the buyer, not the original creditor, now holds the right to collect it.
How much does a debt collector actually pay for an old debt? The FTC found debt buyers paid an average of 4.0 cents per dollar of debt across a large sample of portfolios, with fresher, better-documented debt selling for more and debt older than 15 years selling for close to nothing.
Does paying off an old collection account remove it from a credit report early? No. Paying the balance doesn’t shorten the seven-year credit-reporting clock, which is fixed to the original delinquency date. It may, however, restart a separate state statute-of-limitations clock on a lawsuit in some states.
Can a debt collector still sue someone after the statute of limitations has passed? A collector generally cannot win a lawsuit on a time-barred debt if the person raises the expired statute of limitations as a defense, but the debt itself doesn’t disappear, and a collector can still attempt to collect it outside of court.
Why do the credit-report clock and the lawsuit clock end on different dates? They’re governed by two completely separate laws. The credit-reporting clock comes from a federal statute tied to the date of first delinquency, while the lawsuit clock comes from state law tied to the date of last activity, and the two were never designed to align.
Leave a Reply