While there are certain restrictions as to how collection agencies should communicate to the debtor and that he should not be made to suffer any undue hardship because of a federal law, sad to say, a collection agency can indeed file a lawsuit against a debtor. There is indeed a possibility that a collection agency will sue the debtor after it has initiated recovery procedures but has failed to collect or no payment arrangement has been agreed upon. Fortunately, a lawsuit is regarded as the last resort by many collection agencies.
Also, the Fair Debt Collection Practices Act prohibits collection agencies to call the debtor at his place of work or to apply threatening or abusive language when calling him on the phone. Moreover, this law protects the debtor from undergoing any undue hardship, whatever the result of the lawsuit that has been filed against him. Because of this law, a collection agency cannot file a lawsuit against the debtor in a court that is not close to the place of residence of the debtor. Thus, unless the amount is large enough, a collection agency may be reluctant to file a case if the distance between the collector and the debtor is substantial.
However, if the collection agency decides to pursue the case in court, it would be advisable for the debtor to appear in court because a judgment can still be passed against him even his absence. The collector is usually given the right to garnish his wages subject to certain limits.