Debt Collection Services

Creditors often use debt collection services for a twofold purpose. The first purpose is to obtain payment on overdue bills and the second purpose is to move a debt from an organization's accounts receivable database. It is unfortunate that many individuals incur debts that they are unable to pay back. In these situations the creditor is put in the position of taking action to recover the money that is owed to them. Turning to debt collection services is often the only way to gain back at least some of the funds that are owed. When all is said and done, there may be a significant difference between the amount of monies received in the recovery of debts and the actual amount of cash that was originally owed. The difference between these two amounts is typically labeled as a loss and written off by the creditor. Just how much pressure can be applied to individual debtors can vary according to circumstances, but these practices are controlled by law.

The way that debt collection services work is that the service will retrieve payment from debtors and charge a fee for collecting these debts. That way a creditor can turn what can be a sticky situation over to professionals in this field. Hopefully, this will result in a win/win situation for both the service and the creditor. These debt collection services might also function by purchasing a debt outright. Since these debts are being purchased for far less than their face value, the service can pursue the full value of the money owed while the one time creditor can simply write off any losses. A company may have an individual department that handles delinquent accounts. When this is the case, the department that is engaging in efforts to recover a financial obligation is considered a first party agency. The laws that govern how collections take place will vary depending on whether the agency that is trying to collect the money owed is a first or a third party agency. The person who owes the debt is considered the second party in these situations.

Before independent debt collection services are engaged, a first party agency will usually handle collection proceedings. This can generally last for around six months or so. After that, the liability is often handed over to a third party agency and written off by the first party in most cases. These third parties are what is usually referred to when the phrase debt collection services is used. Contingency fees are sometimes associated with the hiring of these agencies. When an agency collects on a balance that is due, a percentage of that balance will go back to the third party agency. Should a first party creditor decide to curtail any further collections on an obligation, that first party creditor will often pay the contingency fee as part of a cancellation agreement. Other agreements could include a no collection-no fee arrangement. This simply means that a third party agency will not be paid if they do not recover any delinquent balances. The Bible talks about the importance of trusting the Lord. "Rest in the LORD, and wait patiently for him: fret not thyself because of him who prospereth in his way, because of the man who bringeth wicked devices to pass." (Psalm 37:7)

A law was passed in 1977 called the Fair Debt Collection Practices Act. This law controls the practices that are associated with debt collection services. One area of activity that is controlled under this law are the hours of the day or night that collections agencies may contact a debtor. Under this law, a third party collections agency can't make any kind of false or misleading statements when attempting to recover financial liabilities. Administered by the Federal Trade Commission, this act also states that an agency can not use unlawful threats to coerce a debtor and also can't suggest possible courses of action that the agency has no intention of following through on. The practice of placing phone calls for the purpose of tracking when an individual is likely to be at home and receiving calls is legal under this legislation. However, third party agencies are not allowed to place calls in a way that will cost the debtor money such as collect or toll calls. The main role of the collections professional is to remind the debtor of the money that is owed and to encourage the debtor to make attempts at repayment.

The reasons that an individual debtor may find themselves dealing with debt collection services can vary. Poor planning, or over estimating how much indebtedness a consumer can handle are common reasons. Job loss, health issues, or loss of a primary breadwinner can also cause an individual to struggle with bill payment. Organizations such as Americans for Fairness in Lending can help consumers who face these dilemmas. These non profit organizations can help debtors understand exactly what legal rights pertain their situation as well as how to best handle any dealings with third party agencies who may be contacting them. Since some collections professionals work on a commission basis, these workers can be extremely persistent in their efforts, and at times even attempting to bend the law, or violate a debtor's rights. The most effective collections practices will generally involve skill and a certain amount of courtesy on the part of the collections agency. By trying to work toward a workable solution rather than berating or threatening a debtor, arriving at a satisfactory conclusion is much more likely.

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