Debt collection agencies act on behalf of creditors to collect debts when the creditors don't have the time or resources to chase down severely overdue debts for themselves. Collection agencies specialize in this kind of work which means they have staff that specializes in debt collection, which covers a broad range of legal and negotiating skills, and a streamlined process for pursuing accounts.
As a creditor, if you decide to hire an collection agency, you pass the obligation of collecting the debt to them. Normally, if the agency recovers the money they will only keep a percentage of the amount collected as payment.
Some agencies will buy the accounts but most will not. The debtor does not actually owe the collection agency any money but they still owe the debt to the original creditor. By law the collection agency must provide, if asked, proof of the debt (known as validation of debt) that they have been assigned the account for collections on behalf of the creditor.
Occasionally, collection agencies will purchase the debt from the creditor. However, usually all that the collection agencies acquire is the right to carry out the process of debt collection.
All collection companies are governed by federal laws (FDCPA) and collection agencies are not in the business of collecting fraudulent debts. However, when acting on behalf of a legitimate creditor they will take all necessary steps to enforce the collection of overdue accounts, including going to court on behalf of the creditor and reporting to the credit bureaus.
You need a debt collection company when -
the debtor has the ability to pay but ignores you the debt is past due there is not a valid dispute
A debt collection company will approach the situation through a multi-stage letter writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when -
the debtor has or thinks he or she has a defense the amount owed is disputed there is an unrelated adverse claim the debtor's solvency is in doubt or there is the possibility of bankruptcy there is security to recover or a possible prejudgment remedy
If any of these issues occur, the creditor should control all pertinent legal decisions such as if and when to file suit, what attorney to use and any other decisions made prior to or during the court action. This is crucial when the creditor has a long term interest in keeping the customer as his client. Not retaining control of such decisions and proceeding without the advice of a qualified legal representative could leave the creditor open to counter suit.
The option exists where the creditor does not wish to do additional business and the creditor is not interested in the outcome of a debt collection, beyond getting his money, to sell the debt to a debt purchaser. - 16747
As a creditor, if you decide to hire an collection agency, you pass the obligation of collecting the debt to them. Normally, if the agency recovers the money they will only keep a percentage of the amount collected as payment.
Some agencies will buy the accounts but most will not. The debtor does not actually owe the collection agency any money but they still owe the debt to the original creditor. By law the collection agency must provide, if asked, proof of the debt (known as validation of debt) that they have been assigned the account for collections on behalf of the creditor.
Occasionally, collection agencies will purchase the debt from the creditor. However, usually all that the collection agencies acquire is the right to carry out the process of debt collection.
All collection companies are governed by federal laws (FDCPA) and collection agencies are not in the business of collecting fraudulent debts. However, when acting on behalf of a legitimate creditor they will take all necessary steps to enforce the collection of overdue accounts, including going to court on behalf of the creditor and reporting to the credit bureaus.
You need a debt collection company when -
the debtor has the ability to pay but ignores you the debt is past due there is not a valid dispute
A debt collection company will approach the situation through a multi-stage letter writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when -
the debtor has or thinks he or she has a defense the amount owed is disputed there is an unrelated adverse claim the debtor's solvency is in doubt or there is the possibility of bankruptcy there is security to recover or a possible prejudgment remedy
If any of these issues occur, the creditor should control all pertinent legal decisions such as if and when to file suit, what attorney to use and any other decisions made prior to or during the court action. This is crucial when the creditor has a long term interest in keeping the customer as his client. Not retaining control of such decisions and proceeding without the advice of a qualified legal representative could leave the creditor open to counter suit.
The option exists where the creditor does not wish to do additional business and the creditor is not interested in the outcome of a debt collection, beyond getting his money, to sell the debt to a debt purchaser. - 16747
