What Is A Collection Agency And How Do I Know If I Need One?
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by: Mallory Megan
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Word Count: 484
Date: Tue, 16 Mar 2010 Time: 11:14 AM
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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.
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 should use a collection agency when -You know the debtor has the ability to pay the debt is that is due and there are no announced reasons for not paying
the debtor gives you broken promises The debtor refuses to pay voluntarily they have not filed bankruptcy
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 circumstances occur, the creditor should for their own legal protection retain control of critical decisions such as if and when to litigate, what attorney to retain and any other decisions made prior to or during litigation. This is particularly important where the creditor has a long term interest in retaining the customer as his client. Not retaining control of critical decisions and proceeding without the advice of an attorney could leave the creditor open to adverse legal liability.
The option exists where this is not the case and the creditor is not interested in the outcome of a debt collection, beyond getting his money, to sell the debt to a debt buyer.
About the Author
Mallory McGuinness is employed by a collections agency that works with a debt collection lawyer. She also does stories on business, finance, consumer spending and collections agencies.
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