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.
Accounts Retrievable Systems - When To Use A Collection Agency
What is a collection Agency?
A collection agency is a specialized organization that acts on behalf of a creditor to collect overdue amounts. A collection agency usually does not take ownership of the debt but just acts on behalf of its clients to organize the collection activity. It does not guarantee the collection.
Why do people fail to pay?
There are many reasons why people do not pay on time. A lot of the time people just don’t want to pay. Sometimes genuine financial difficulties, particularly of a temporary nature, are among the causes. In such cases, the person is likely to pay as soon as his financial problems are over.
The downside of using a collection agency
The persons owing the money generally view using a collection agency with apprehension. This makes them view the approach by a collection agency in a negative light. This might cause them to resist any attempts to collect money from them, even if it’s genuine. Moreover, it might result in loss of genuine and valuable customers, from whom the money would come to you in course of time, although they might have delayed the payment temporarily or in a particular case.
It is, therefore, apparent that using a collection agency should generally be the last resort. There are a few collection agencies that specialize in early intervention on a diplomatic basis.
Use a collection Agency when the case is clear
The thing that can be inferred straightaway from the above is that you should use a collection agency when you are reasonably certain that the party has the capacity to pay, is obliged to pay the amount, and is refusing or is unwilling to pay. Also the debt should be due – in fact overdue. It’s always better to wait for a short while and make your own attempts through reminders and follow up with the party before you approach a collection agency.
When not to use a collection agency
You should also consider when it is inappropriate to use a collection agency. There are many situations in which the debtor may have her own defense, and initiation of any formal or legal proceedings may become counterproductive and lead to unnecessary delays and complications. First of all, you should consider whether the debtor – the person owing the money to you – has, or thinks he has, a valid reason for not paying. If this is the case, it is very likely that he would be prepared for a fight even if it means a prolonged legal battle. This works to the advantage of neither of you. In such cases, it is better to first try and sort out the issue, if possible. Among other things, this is going to happen if the amount in question is under dispute. If this the case find out the cause for the dispute and try to settle it through proper communication and discussion. Another thing that might happen is that there is another claim against you that the debtor is trying to adjust against the current debt. In this case it is better to sort out the issue in totality.
Other difficulties and issues
Even where the debtor has no valid reason there might be circumstances under which it might become difficult to recover the amount legally. For example the debtor might not be solvent enough to pay the amount. Legal recourse would only establish your right at the most, but would not obtain the payment to you. Bankruptcy also prevents collection activities.
The cost of using the services of a collection agency
You must remember that using a collection agency involves payment of fees to the agency itself. Another consideration is the fact that legal proceedings initiated by the collection agency under circumstances similar to the ones outlined above could make your life more difficult and make the collection process long drawn out and of uncertain outcome. Because of this, it is better that you retain control over this process and over the decision as to if and when to proceed legally.
When you have security
If you possess a collateral security, it is best not to proceed legally or engage a collection agency if you can use the security to recover your amount.
Accounts Retrievable Collection Agency - Child Support Collection
If your child’s other parent sues you and gets a judgment against you for unpaid child support, that parent has a whole host of collection methods available (more than without a judgment for child support arrears). And even if the custodial parent got the judgment in one state and you have since moved to another state, that parent can register the judgment in the second state and enforce it there.
The most common method of collecting a judgment for overdue support is wage garnishment. The custodial parent can also seize your personal property.
What Is Wage Garnishment?
A wage garnishment is similar to income withholding. ( A portion of your wages is removed from your paycheck and delivered to the custodial parent before you ever see it. In many states, the arrears need not be made into a judgment to be collected through wage garnishment.
Procedures for Wage Garnishment
To garnish your wages, the custodial parent obtains authorization from the court in a document usually called a writ of execution. Under this authorization, the custodial parent directs the sheriff to seize a portion of your wages. The sheriff in turn notifies you and your employer.
How Much Can the Court Take?
The amount garnished is a percentage of your paycheck. What you were once ordered to pay is irrelevant. The court simply wants to take money out of each of your paychecks — and leave you with a minimum to live on — until the unpaid support is made up.
If a court orders that your wages be garnished to satisfy any debt except child support or alimony, a maximum of roughly 25% of your net wages can be taken. For unpaid child support, however, up to 50% of your net wages can be garnished, and up to 60% if you are not currently supporting another dependent. If your check is already subject to wage withholding for your future payments or garnishment by a different creditor, the total amount taken from your paycheck cannot exceed 50% (or 65% if you are not currently supporting another dependent and are more than 12 weeks in arrears).
How the Garnishment Is Initiated
To put a wage garnishment order into effect, the court, custodial parent, state agency, or county attorney must notify your employer. Once your employer is told to garnish your wages, your employer tells you of the garnishment.
Requesting a Court Hearing
You can request a court hearing, which will take place shortly after the garnishment has begun. At the hearing, you can make only a few objections:
– The amount the court claims you owe is wrong.
– The amount will leave you with too little to live on.
– The custodial parent actively concealed your child, as opposed to merely frustrating or denying your visitation (not all states allow this objection).
– You had custody of the child at the time the support arrears accrued.
If you’ve got a money judgment and want to collect, here’s how to start.
1. Don’t start too soon.
Don’t be in a rush to ask for your money. Most states give a losing party the right to appeal, so it’s usually a good idea to wait until the deadline for filing an appeal (usually 30 days or so) has passed. If you start bugging the other party sooner, you may just nudge him or her into filing an appeal. And generally, the other party doesn’t have to pay a judgment while an appeal is pending.
2. Ask for your money.
A surprising number of debtors will pay their court judgment if you ask nicely. A business-like request for payment is often all it takes, especially if you mention that an unpaid judgment will probably show up on the debtor’s credit report. Don’t tell the debtor exactly how you plan to collect your judgment if he or she doesn’t pay up, however — this may just encourage the debtor to start hiding assets.
3. Suggest ways the debtor can raise cash to pay you.
Once you win a court judgment, you are legally entitled to your money. If the debtor claims he or she wants to pay but doesn’t have the money, suggest some ways to raise cash — for example, by borrowing money from a friend or relative, taking a cash advance on a credit card, or dipping into retirement accounts.
4. Start with easy-to-reach assets.
When you’re planning a collection strategy, it makes sense to start by going after the low-hanging fruit. Wages, bank accounts, and money paid to a debtor’s business are all relatively easy assets to grab — and the procedures for doing so are simple and inexpensive. On the other hand, trying to force a sale of the debtor’s vehicle, house, or personal property can be complicated, expensive, and time consuming.
5. Don’t harass the debtor.
Although you are entitled to go after your money, you should not harass or threaten the debtor. Avoid practices like calling the debtor early in the morning or late at night, repeatedly visiting the debtor at work, or threatening to harm the debtor for failing to pay. Humiliating or intimidating a person who owes you money can be counterproductive, and it could even get you sued.
6. Consider settling for less.
You have the legal right to collect the full judgment you won, but that doesn’t mean that you’ll be able to do it. It can take a long time to collect a judgment, and you might have to spend a lot of energy tracking down the debtor’s assets (or waiting for him or her to acquire some), taking them, and converting them to cash. In many cases, it makes more sense to settle for a bit less than the full claim, in exchange for having the whole thing over and done with.
7. Pay attention to timing.
In many circumstances, you’ll want to move quickly, in order to maintain the element of surprise. For example, a debtor who knows that you plan to go after the money in his or her bank account is likely to close the account and move the cash — before you ever get your hands on it. You’ll also want to make sure to move at the right time — for example, by going after the debtor’s bank account right after he or she deposits a paycheck, not right after he or she pays off a mortgage.
8. Keep tabs on the debtor.
Until you’ve collected your judgment, you will have to keep tabs on the debtor. You’ll want to know if he or she moves, gets a new job, buys an expensive vehicle, or inherits money, for example. Make a point of calling the debtor periodically — and stay in touch with any mutual friends or business contacts who might have valuable information.
9. Consider hiring an expert, if necessary.
There are plenty of collection professionals out there, who will try to collect your judgment in exchange for a percentage of whatever they are able to get from the debtor. If you have had no success in collecting your judgment or you aren’t willing to spend the time and effort necessary to get your money, hiring an expert might be a good idea. After all, it’s better to get some of the money you’re owed than none.
10. Know when to give up.
There are lots of way to collect a judgment — but all of them take time and money. And even though you’re entitled to recover many of the costs of collecting a judgment from the debtor, that won’t do you much good if you can’t even collect the original judgment. Remember the old saying, “Don’t throw good money after bad”? If you’re dealing with a debtor who is unwilling or unable to pay, you might eventually have to decide to cut your losses.
Good debt collectors are hard to come by when choosing a collection agency. Good debt collectors once they are talking with a debtor, probe to find out what is going on. Often, the loss of a job, an illness, divorce, or maxing out the credit cards results in a person becoming dysfunctional when it comes to handling his/her financial obligations. He/she is embarrassed and frequently a little frightened and reluctant to discuss the problem.
Good debt collectors and a good debt collection agency will often be able to draw the debtor out. Debt collectors are not allowed to play attorney by advocating bankruptcy. In fact, they have to be very precise when talking with debtors.
However, they can suggest debtors who said they have financial difficulties contact a legitimate credit counseling service. the credit counseling service will help the debtor to work out a payment plan that will enable him/her to gradually pay off creditors. You as the collection agency will have a small commission deducted from the money that is earmarked for you, but it is well worth it because you will be cashing checks on a monthly basis.
Accounts Retrievable Systems - Should I Hire An Agency?
The answer is yes and here’s why!
When lenders or creditors do not have the time to pursue debtors, they usually hire debt collection agencies to do the job for them. On their behalf, debt collector agencies will be charged with collecting payments from individuals, entities or businesses.
Debt collection encompasses a wide range of negotiating skills, legal processes and a smooth procedure for chasing down past-due accounts. A lot of agencies act as agents of the lenders and do the task of collecting debts for a fee or a certain percent of the full amount owed.
Usually, if the agency succeeds in the debt collection, the creditor will set aside a percentage of the collected amount. This will then serve as the payment for their services. Commercial debt collector services have skilled professionals to look over other people’s debt. These professionals are trained in the art of debt collection depending on the type of debtor. The collection agency usually comes up with a strategy for debt collecting.
If you opt to use a debt collection service, you need to first consider the advantages of hiring Debt Collection Agencies
• Debt solicitors that focus on collecting debts usually have the expertise, time and resources needed to be able to carry out the job.
• Most of the time, hiring a trustworthy debt collection company is a speedy process of recovering debts.
• If the borrower still refuses to settle their debt, the agency can send solicitors on your behalf.
• If the firm that you hire is professional and polite enough, you can keep your customer, if you want to.
• They are focused on your business plans without the worry of bad debt accumulation.
• They have good customer relationships as collection agencies are professional and respectful.
• They save the expense of in-house salaried personnel.
• They recover more debt as collection agencies have the incentive of getting a percentage of what they collect.
• They make sure that they safeguard your business against legal troubles as the collection agencies are familiar with debt collection rules and regulations
Accounts Retrievable Systems - How Collection Agencies Help
The term collection agency is usually applied to third-party collection agencies, called such because they were not a party to the original contract. The creditor assigns accounts directly to such an agency on a contingency-fee basis, which usually initially costs nothing to the creditor or merchant, except for the cost of communications. This however is dependent on the individual service level agreement (SLA) that exists between the creditor and the collection agency. The agency takes a percentage of debts successfully collected; sometimes known in the industry as the “Pot Fee” or potential fee upon successful collection. This does not necessarily have to be upon collection of the full balance; very often this fee must be paid by the creditor if they cancel collection efforts before the debt is collected. The collection agency makes money only if money is collected from the debtor (often known as a “No Collection – No Fee” basis). Depending on the type of debt, the age of the account and how many attempts have already been made to collect on it, the fee could range from 10% to 50% (though more typically the fee is 25% to 40%).
Some debt purchasers who purchase sizable portfolios will utilize a Master Servicer to assist in managing their portfolios (often ranging in thousands of files) across multiple collection agencies. Given the time-sensitive nature of these assets, many in the Accounts Receivable Management (ARM) industry believe there is a competitive advantage in utilizing this technique as it gives the debt purchaser more control and flexibility to maximize collections. Master Servicing fees may range from 4% to 6% of gross collections in addition to collection agency fees.
Some collection agencies offer a flat fee “pre-collection” or “soft collection” service. The service sends a series of increasingly urgent letters, usually ten days apart, instructing debtors to pay the amount owed directly to the creditor or risk a collection action and negative credit report. Depending on the terms of the SLA, these accounts may revert to “hard collection” status at the agency’s regular rates if the debtor does not respond.
In many countries there is legislation to limit harassment and practices deemed unfair, for example limiting the hours during which the agency may telephone the debtor, prohibiting communication of the debt to a third party, prohibiting false, deceptive or misleading representations, and prohibiting threats, as distinct from notice of planned and not illegal steps. . In the United States, consumer third-party agencies are subject to the federal Fair Debt Collection Practices Act of 1977 (FDCPA), is administered by the Federal Trade Commission or FTC.
In the United Kingdom third-party collection agencies that pursue debts regulated by the Consumer Credit Act must hold a Consumer Credit Licence and work within the framework of the 2003 fair debt collection guidance; licences are issued and regulated by the Office of Fair Trading.
Accounts Retrievable Systems - About Our Collection Agency
Since 1986, ARS has delivered professional, highly effective results for clients on a worldwide basis. ARS is recognized as a leader in Judgment Collections, Commercial Collections, Consumer Recovery, and is a specialist in collection of Child Support and Spousal Maintenance. Our partnership approach, rapid collection and ability to preserve relationships form the cornerstone of our commitment to excellence.
With three decades of experience both domestically and internationally, ARS serves a broad spectrum of industries.
ARS collection agency clients benefit from an array of collection solutions designed to increase cash flow, reduce expenses, improve operational efficiency and maintain positive customer relations. We are proud of our ability to deliver professional, effective and timely results worldwide.
ARS strives to remain a leader in the industry. ARS is comprised of a strong, cohesive and committed team. Our consistent track record for successful outcomes stems from a forward-thinking corporate mix where personal and professional aspirations thrive and progressive ideas flourish. Our team is kept current on all laws and statutes, FDCPA and FCRA compliance through ongoing education, and by attending seminars and meetings throughout our affiliations with the Commercial Law League of America (CLLA), the American Collectors Association (ACA), and DBA International (DBA).
Our collection agency’s commitment is to constantly reinvest in our employees, new technology, recovery resources, professional staff, legal solutions, and innovative systems and procedures.
ARS’s legal solution is centered around our network of experienced collection attorneys. Our Forwarding Department coordinates litigation services for all 50 states and beyond. By having successfully litigated tens of thousands of cases for creditors, our legal network has the litigation experience to help our clients achieve maximum results and minimize any potential exposures.
ARS collection agency utilizes a wide range of technological tools and resources to help each client achieve the best possible results. Our staff has access to the latest software programs with enhanced security and a state-of-the-art secured network with a full disaster recovery program.
Our focus is on the specific needs of each client’s portfolio, whether it is for one claim or for thousands and is built on systems and personnel already developed, tested, and proven on a day to day basis. ARS collection agency will never close an account until every collection option has been exhausted.
Our services are based on a contingency fee arrangement; therefore if our attempts to collect are not successful, you will not be charged!
Accounts Retrievable Systems - Commercial Debt Collection
The economic downturn and the continuing recession are spurring bad debt. Debtors refuse to pay and businesses are left holding inactive past customers. This has blocked the funds flow that businesses are so dependent on. Many companies have tried collecting bad debts but with marginal and rare success. That’s because they neither possess business debt collections experience, nor can they tap into excellent investigative sources. This is why businesses must rely on commercial collections agencies.
Hopefully, the client pays up at the expected time, the business remains in the black and the business can keep running. Unfortunately, a credit agreement may be broken forcing one to take steps to get a debt paid up. And this is exactly what a commercial collections agency is designed to deal with.
Collection agencies assist business to collect bad debts, which helps restore some positive cash flow for the company. A number of reasons point to the usefulness of using collection agencies to collect business debt:
Business Debt collection is a serious business that requires a large network and special negotiation skills and most businesses do not have it in them to chase debtors. They would rather focus on their business and on generating revenues rather than waste time and run the risk of being unnecessarily sued. So, business debt collection requires experience and skills and so it is best that it is left to a commercial collection agency. Moreover, the success rate and low fees charged by these agencies ensure a win-win scenario for the business owner.
When you have located several possible agencies to work with, you will next want to contact them to request more information. Have a copy of the credit agreements that your clients have signed ready to provide to the prospective agency as well as copies of typical outstanding invoices to be paid and any other data to demonstrate the client’s typical behavior.
While speaking with various agencies, you will be provided with additional services that they offer. Many commercial collection agencies have their own legal departments in addition to collection departments, and this can greatly reduce the amount of time and money that your company will have to pay if you choose to pursue outstanding debts through the courts. Price negotiations will also be discussed at this time. If you’re provided with lower quotes from competitive agencies, mention it.
Debt consolidation services, for those who are looking for a way to maintain a comparatively decent credit score or for those trying to avoid bankruptcy, is ideal as a debt solution. You can be the only judge if debt relief will work in your position. Before you decide, think carefully of the pros and cons of debt consolidation services.
There are various kinds of relief companies willing to offer their services, however you must be wary over those who are just after your hard-earned money. To make sure that the company is indeed willing to help you solve your dilemma, the company must have full accreditation’s from national debt relief groups to solidify their legitimacy and reputation.
Taking steps to partner with a commercial debt recovery agency can potentially lead to exponential savings, a higher profit margin, and a lack of backlash that could lead to failure of a business.
Accounts Retrievable Systems - Commercial Collection Agencies
Commercial debt collection agencies are organizations that specially deal with the attainment of payment on delinquent business accounts. The agencies work through direct and prompt negotiations with debtors for the purpose of ensuring that they collect, and may employ passive contact approaches like letters and other types of written notifications as a starting point. There are instances when debtors are unwilling to negotiate ideal plans for making full payments and when this happens, the debt collection agencies are known to resort to more aggressive measures. However, at all times, they operate within the confines of the law. Some of the actions taken by the agencies include pursuing of legal representation or reporting defaulting debtors to major credit bureaus.
If they take legal action and succeed, they do not hesitate executing the judgment and in some cases, this might include the seizure of debtors’ property. In extreme circumstances they might even move on to liquidation of debtors assets. Agencies that deal with solving debts between businesses are also known to be well equipped with the ability of handling any issues or concerns that might arise in the process of service delivery. The services offered are varied and might include obtainment of payment on bad checks, skip tracing, second placements or any other issue that might be specific to individual clients and circumstances. In essence, the services offered by commercial debt collection agencies are designed to be used by any business that wishes to recover payments on delinquent accounts.
A large number of commercial debt collection agencies are also known to offer industry specific features with their services. Top on the list is credit application assistance. This is a valuable service and it is offered by a majority of the agencies. With this program, the agencies are able to sniff out any untrustworthy or fraudulent applicants before they accumulate debts. In order to accomplish this end, there is a lot of screening that must go on and this is done on the credit report of the applicant. Some of the things they look out for include false phone numbers, addresses and any other details that might be viewed as an indication of increased risk.
Commercial debt collection agencies are also known to research detailed business profiles and this often includes prior credit history of a company. In addition to this they can also link the personal credit history of business owners with that of the company for the purpose of ensuring that any unforeseeable predicaments are eliminated at an early stage. There are other features (which are part of benefits offered by commercial debt collection agencies), and these include consumer profile credit reports and collection reports. The point is that these companies can help nip a problem in the bud before it blossoms into a major problem down the line.
Another important aspect that defines commercial debt collection agencies is their ability to track down delinquent clients. These agencies are operated by professionals who know how to operate specific technology in order to acquire the desired results. They do this through a technique known as skip tracing where they search traces of an individuals activity though data banks and some other additional locator programs. Collection agencies employ trained professionals who specialize in getting you money that you deserve. Leave it to the professionals to collect your money, saving you time and effort in having to call clients as ‘the bad guy’. These agencies use tact and diplomacy to make the process as easy as possible, allowing you to run your business without the need to track down past clients.
