What is a the purpose of a Collection Agency & when should I use?
Debt collection agencies are hired on behalf of creditors to collect money when the creditors don’t have the time or resources to effect collections on overdue debts for themselves. Collection agencies specialize in getting people to pay, they have staff that specializes in debt collection and skip-tracing, which covers a broad range of FDCPA legal and debt negotiating skills, and a streamlined process for going after 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.
Most collection agencies do not buy the debt outright. The debtor does not actually owe the agency the money. It still owes the debt to the original creditor. The collection agency will provide, if asked, proof (known as validation of debt) that they have been placed into collections on behalf of a 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 attempt to collect via a letter writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when –
the debtor has or thinks he/she has a valid defense the amount owed is disputed in full there is faulty product the debtor’s solvency is in doubt or there is the possibility of bankruptcy
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.
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