Log InJoin 

Free Creative Commons Images

Similar Articles

Random Articles

What Is A Collection Agency?

A collection agency, as its name implies, collects on outstanding debt either for itself or another organization. There are two primary types of collections agencies. Those which are contracted by other businesses to collect on a debt owed by customers or contractors of which the collection agency gets either a flat fee or percentage of the debt collected. The other type of collection agency purchases debt for pennies on the dollar from businesses and then keeps any amount of the outstanding debt from the debt holder.

Collection agencies are not inherently bad or motivated by placing people already under financial stress in more difficult situations. The reason why collection agencies get a bad reputation is due to the few bad apples who abuse their positions of power and violate federal and state laws when collecting on outstanding debt. Most collection agencies, especially those contracted by large organizations, are honest and legal operators collecting on outstanding obligations to make businesses whole for services rendered or products sold.

Due to unethical and illegal practices in the past from the collection industry, Congress passed the Fair Debt Collection Practices Act which stipulates specifically how a collection agency must operate, who it is allowed to deal with and what guidelines it must follow when collecting on debt. The FDCPA provides numerous consumer protections and understanding your rights will go a long way when dealing with a collection agency.

The practices that collection agencies must follow when collecting on outstanding debt relate primarily to who they can deal with and when they can contact the debtor. The collection agency is only legally able to speak with what is called a responsible third party or the actual debtor. Outside of these two parties, all the collection agency can do is leave a message that they called and a callback number. They are not able to mention the debt or disclose any other personal financial information. The agency is also only allowed to contact the debtor between the hours of 8 AM and 9 PM and only within reason through the course of the week. What this means is a collections agent is not allowed to make a dozen calls per day even though it is between the hours of 8 AM and 9 PM.

Large organizations such as credit card issuers and automobile financiers are normally in compliance with the FDCPA and have no interest in harassing customers. More often than not an individual has missed a payment or has gotten slightly behind and the collections department or authorized subcontractor merely wants to get them back on track. They do this through a number of incentives such as checks over the phone or other payment plans and will often go as far as to wave penalty fees and accumulated interest.

Since you now know that 95% of the collections agencies out there are merely interested in getting a debt holder back on track with making timely payments of an outstanding obligation hopefully this can ease your fears in the future. Should you encounter a illegal collection agency, you are now more adequately prepared with the FDCPA to know your rights and pursue legal remedies if necessary. Collection agents have a job to do like everyone else and are only interested in working with individuals to get a loan repaid in a timely and cost-effective manner. If you show a willingness to work with them and meet them halfway it will go a long way toward making it a simplified and amicable process that both parties can benefit from.