How A Debt Collection Agency Can Help You
Have you received a debt collection letter or received numerous phone calls from Collection Agency. If you are wondering why you are receiving so many debit collection calls or letters is to understand what is Collection Agency?
Collection Agency is well defined business model that pursues individuals or business to collect payments on debt owed by them. These collection agencies have tie up with banks, credit card companies or business and act as their agents to collect debts from individuals and business for a small fee.
There are two types of collection agencies. The first type of collection agency is the one, which act as agents for creditors (banks, credit card companies, business etc). They pursue defaulters and recover complete debt for businesses. In exchange of there service lenders would pay a percentage of recovered amount to collection agency. The second type of collection agency is the one which work as debt buyers. They buy full debt from business for fewer amounts and then pursue defaulters to recover complete amount. Business also uses this option to remove bad debt from their account receivables. This helps them to keep clean account and same time to get some amount against bad or risky accounts.
Since the nature of job is to recover money and there are many financial constraints attached to this business. Due to this sometime collection agency overstep and pursue aggressively and sometime use abusive practices. In United States they are suppose to adhere Fair Debt Collection Practice Act. Failure to abiding the law they can be sued under United States constitution. In some cases debtors have sued the collection agency for their aggressive and abusive practice and won cases with monetary damages.
Let us understand the process of debt collection by collection agency. First an individual may have taken loan from banks, lenders or used available balance on credit card. Due to some reasons individuals is not able to pay loan or balance back to lenders. Usually in this case lenders and credit card companies will enter into some type of payment plan to help an individual to lower monthly payments. Some of the individual take this option and some simply walk off without paying the balance. For those bad accounts business take help of collection agency to recover the owed amounts. Since collection agency are only in the business of collecting bad debt. Due to this they pursue aggressively and recover money in most of the cases.
People should be aware that collection agency has authority to report credit bureaus operating in United States, if you fail to pay owed debt or could not work with collection agencies. They will report to credit bureaus with full account details with a negative remark. Once derogatory remark is reported in an individuals consumer file at credit bureaus, it will severally damage your credit score (three digit number to see an individuals trustworthiness). The lower credit score will keep you out from getting lower interest rates on home loans and credit cards. It also makes difficult in getting homes or rental homes. Also remarks from collection agency on consumer report stay for 3 to 4 years.
Does this means an individual should give up against aggressive tactics used by collection agencies. The answer is big no. First an individual should check receipts for the account and see how much was paid to lender or business and verify complete account details. In case an individual is in hardship one can enter in payment plan with collection agency. This will provide you some time to pay balance.
In all conditions opening communication channel with collection agency is in favor of consumer. In case of harassment calls, harsh language used by collection agencies consumers should report to local authority or make complaints to state consumer authorities.
In all communication keep record of documentations such as calls made or received, letter sent or received, payments made and all old documentation related to original loan or business transaction.
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