Want to understand the Debt Collection Agency business? you are at the right place for that.
Perhaps you are one of those few debtors out there who have been contacted by a debt collector for the first time, or it happens that you worried that a collector or Debt Collection Agency will contact you so soon because of the fact that you have failed to pay your bills as at due, it is possible you have many questions and are understandably nervous about the whole process.
In this piece of the article today you will be introduced to the debt collection business so that you can have an understanding of the collection agency’s perspective. And having the understanding definitely will give you a better idea of what motivates debt collectors and what their incentives are, which can help smooth your interactions with them and make the process less stressful for you.
Debt collectors in the real sense work for the debt collection agency, though some of them are seen to operate independently, and some are also attorneys. But sometimes these agencies act as middlemen, collecting customers’ delinquent debts that are debts that are of 60 days past due and in the same vain remit them to the original creditor. The creditor pays the collector a particular percentage, which ranges from 25% to 50% of the amount been collected. Debt collection service agencies collect delinquent debts of all types. Take, for instance, they collect credit cards, medical, automobile loans, personal loans, business, student loans, and even unpaid utility and to cell phone bills.
Collection agencies often specialize in the types of debt they do collect. For instance, an agency might be empowered to collect only delinquent debts of at least $200 that are less than two years old. A reliable agency also does limit its work to collecting debts that are within the statute of limitations, but this varies by state to state.
For the difficult-to-collect debts, some collection agencies do negotiate settlements with the consumers for less than the amount owed. And it’s their work to refer cases to lawyers who file lawsuits against customers who have refused to pay the collection agency as at due.
This is the way it works, when your original creditor for example has determined that it is unlikely to collect, the next thing he or she will do is to cut the losses by selling that debt to available debt buyers. And he or she can now package together with numerous accounts with similar features and sell them as just one group to Debt buyers. Now the Debt buyers have choices to choose from packages of accounts that are not that too old and that no other collector has worked on yet, accounts that are long old and that other collectors have failed to collect on, and accounts that fall somewhere in between.
Debt buyers from my experience purchase these kinds of packages by a bidding process, paying on average like 4 cents for every $1 of debt face value. This means that a debt buyer can pay $40 to purchase a delinquent account that has a balance owed of $1,000. And the older the debt, the lesser it costs since such debts like this is less likely to be collectible.
The type of debt you are to sell also influences the price too: Mortgage debt for example is worth more, while utility debt is worth significantly less.
Debt buyers will keep everything they collect. And they do this because they have purchased the debt from the original creditor, they don’t send any of the amounts collected to that creditor in any way.
Debt collectors for sure will get paid whenever they recover delinquent debt. In fact, the more of what they recover, the more they earn. Old debt which is past the statute of limitations or is otherwise considered uncollectable is bought for pennies on the dollar and when this happened, it means potentially this makes collectors quite a big profit when such debts are eventually collected.
What Collectors of Debt Collection Agency Do?
Debt collectors use the means of both letters and phone calls to contact delinquent borrowers and try their best to convince them to repay what they owe. When debt collectors can’t reach the debtor with the contact information provided by the original creditor, they go further to use the means of computer software and private investigators. And sometimes also, they do conduct searches for a debtor’s assets, like the bank and brokerage accounts, so as to determine a debtor’s ability to repay the owed. Sometimes collectors could report delinquent debts to credit bureaus to encourage consumers to pay since delinquent debts can do serious damage to a consumer’s credit score.
The simple truth is that a debt collector has to rely on the debtor to pay and has no right to seize a paycheck or reach into a bank account, even if the routing and account numbers are known by them except in a situation where judgment is obtained by such collector. Meaning that the court has ordered a debtor to repay a certain amount to a particular creditor. And for this to happen, a collection agency must take the debtor to court before the statute of limitations runs out and win a judgment against such debtors. It is this kind of judgment that gives a collector the right to begin garnishing wages and bank accounts, but the collector must still contact the debtor’s employer and bank to request for the money.
Debt collectors as a matter of importance also will contact delinquent borrowers who have already had a judgment against them. Even for the fact that a creditor wins a judgment, sometimes may not be so easy to collect the money. Along with placing levies on the bank accounts or motor vehicles, debt collectors can try to place a line on the property and as well as forcing the sale of an asset.
How Reliable Collectors Operate?
Here and everywhere, debt collectors have a label of a bad reputation for harassing their consumers. The Federal Trade Commission has a record of more complaints about debt collectors and debt buyers than other single industry around. The Fair Debt Collection Practices Act has limited how collection agencies can collect a debt in order to keep them from being abusive, unfair, and deceptive, and there are debt collectors who are careful not to violate enacted consumer protection laws.
Below here is what you can expect from a reliable collector.
In contact with debtors, a collector who is reliable will be fair, respectful, honest, and law-abiding in their dealings. After you have made a written request for verification of a debt you’ve been contacted for, which is your legal right anyway, the collector will suspend collection activities and send you a written notice of the amount you owed, the company you owe it to, and how to pay the debt owed. If it happened that the collector can’t verify the debt, the company will as a matter of fact stop trying to collect it from you. It will also inform the credit bureaus that the item in question is disputed or request that it be removed from your credit report. If the collector is working as a middleman for a creditor and doesn’t own your debt, they will notify the creditor that they have stopped trying to collect because they couldn’t ascertain the truth about the debt.
It is a must that Collectors follow certain time limits, such as not reporting a debt that is more than seven years old and sending a debt validation letter within five days of the first contact with the debtor.
Reliable debt collectors or Debt Collection Agency will try all the best possible means to obtain accurate and complete records so that they don’t pursue people who don’t really owe money. If you make them know the debt in question was caused by identity theft, they will make a diligent reasonable effort to verify your claim. And they won’t try to sue you for debts that are beyond the statute of limitations.
Reliable debt collectors will never do anything to harass or threaten you or treat you differently because of your race, sex, age, or other characteristics. It will not be in their habit to make public any debt you owe or try to deceive you in order to collect a debt, nor will they pretend to be law enforcement agencies or try to threaten you with arrest. They also won’t contact you before 8:00 a.m. or after 9:00 p.m. without your express permission to do just that.
The Summary Line of It All
Debt collection no doubt remains a legitimate business at any day and any time. Whenever they contact you, know that it is not necessarily the beginning of an abusive relationship. Many collectors are found, to be honest people who are just trying to do their jobs accordingly and will work with you to create a plan that will for sure help you to repay your debt, whether it means you are paying it in full, in a series of monthly payments, or even in a reduced settlement.
You should as a matter of importance then put up your guard when a collector or Debt Collection Agency contacts you, and you should know what your rights are and understand what that of the debt collectors are and what they aren’t permitted under the law to do to you. And now that you have known a bit about how Debt Collection Agency business works, I believed it will help in resolving your delinquent debt amicably with them whenever such occasion arises.