Can a Collection Agency Come After a Minor?

A contract isn't always legally binding

Just about everyone has heard horror stories about children and teens who carry a dismal credit record because a collection agency pursued them for a debt while they were still a minor. If you are a minor and debt collectors are harassing you, you generally have more secure rights than a legal adult facing the same problem.

Minors, Collection Agencies and Contracts

In most states, minors cannot be held responsible for contracts they sign because a minor is not legally capable of entering into a binding contract. Let's look at this in regards to credit card debt.

Judy is 16. A credit card company sends Judy a credit card application (against the law per the CARD Act, but that's irrelevant to the point here), she fills it out, sends it in and gets her new credit card. Judy doesn't manage money well and defaults on the payments. The original agreement that Judy signed with the credit card company gave the company the right to pursue collection activity against her in the event she defaulted on the debt. Because Judy is a minor, the credit card agreement – and the debt she incurred on the card – may not be legally enforceable.

This isn't to say that Judy won't have a fight on her hands. The collection agency does not want to be told that it can't collect and will go out of its way to make sure that Judy pays. Judy's parents will likely need to hire an attorney to draft a letter to the collection agency notifying it that continued collection activity is against the law.

Adult Co-Signers Responsible for Minor's Debts

Parents are generally responsible for teens' debts

In most cases, minors are protected from Judy's situation. The vast majority of merchants will require a minor to have an adult co-signer before providing the minor with a contract. This gives the creditor someone it can legally pursue in the event the minor does not pay the debt. For example, if Judy's parents had to co-sign with her for the account, the credit card company and collection agency would doggedly pursue her parents for payment – not her.

Emancipated Minors and Debt Collection

A minor can gain the ability to enter into a legally binding contract by becoming emancipated. Emancipated minors have all the rights and responsibilities of a legal adult. If Judy was an emancipated minor, she would have the ability to sign a binding contract with a creditor without having a co-signer. Because an emancipated minor is bound just as tightly to the contracts she signs as an adult, a collection agency can pursue the individual for payment using the same methods it uses to collect from adults.

Voidable Contracts for Minors

Now, here's where things get slightly complicated. Remember when I said minors can't enter into binding contracts? That the technical side of things. The contract isn't technically void until its voided by the minor. It's simpler than it sounds. Lets look at the example from a different angle:

Judy loses her job at the department store where she works after school and knows that she cannot afford to make payments on her credit card. She writes the credit card company a letter informing them of her age. She sends a copy of her driver's license with the letter to prove that she is, in fact, a minor. Judy notes in her letter that, because she is a minor, she is voiding the contract she signed with the credit card company. The credit card company has no choice in the matter and must terminate the agreement.

This does not mean that the credit card company won't still pursue Judy for what she owes. It will, but it will likely wait until Judy turns 18 to do so.

All of this comes into play because the credit card company knew that Judy was 16 when she applied for the card. Had she lied about her age and claimed to be 18, the situation gets more complex. State laws vary, but lying to a creditor in order to obtain an account as a minor is a clear case of fraud. In that situation, a creditor or collection agency would likely be able to pursue the cardholder for payment regardless of whether or not the debtor is a minor.