Guide to Debt Collection Agencies
What is a Debt Collection Agency?
A debt collection agency is a person or a company that is basically a bill collector. Their purpose is to try to recover debts that have not been paid and are overdue. When traditional methods to get a debt paid are not successful, debt collection agencies will be brought in to try to recover the debt.
Who are Debt Collection Agencies?
There are different types of collection agencies. A first party collection agency is one that is associated with the lender and will try to get the debt paid back. It is only after these attempts have proved to be unsuccessful that it is turned over to a third party agency. These agencies are usually independently owned and operate to collect late or difficult debts. If you are receiving calls or bills from an agency that you are not familiar with, the chances are good that your debt has been turned over to a collection bureau.
Why Do Lenders Turn Debts Over to Debt Collection Agencies?
When lenders are unsuccessful in collecting on their debts, they will turn them over to debt collection agencies. These agencies will then take control of the account and work with the debtor to try to recover the balance of the debt.
When Do Lenders Turn Debts Over to Debt Collection Agencies?
Lenders will usually keep the account for about six months before turning it over to a
third party collection agency. At this point, they will write off the debt as a bad investment and a negative entry will be put on the debtor’s credit report.
How Do Debt Collection Agencies Collect the Debt?
Debt collectors are offered accounts from lenders to help them collect all or part of the money that is owed to them. They are usually paid a certain percentage of the debt that they collect as opposed to a specific fee. Therefore, since this is their incentive to collect on the debt, some debt collectors can get over aggressive. However, there are Federal laws that outline the behavior standards that debt collectors are required to practice. They may call or write letters, sometimes in threatening tones, in an attempt to get the borrower to pay.
Know Your Rights
Debts that have been turned over to debt collection agencies are a serious matter. They can affect your credit rating which can limit the amount of money that you can borrow and the interest rate that is offered. The poorer the credit rating, the more that you will have to pay to borrow money. Therefore, if you find yourself in this type of situation, learn your rights and get help immediately.
If your are contacted, be sure to get all pertinent information such as the name of the collection agency, phone number, account in question, amount owed, and questions of this sort.
For more information
1) Wdfi.org
3) Privacyrights.org