Debt is a massive issue in this age where nearly everyone has some sort of debt that they have to pay every month.
Sometimes, these debts go unpaid due to the nature of our lives, and you fall back on your payments. At that point, debt collection comes into play from your debtors.
When it comes to debt and debt collection, there are many different methods that creditors use to collect their debt; sometimes they come to you directly, sometimes they go through a lawyer, and sometimes they go to a debt collection agency.
Most debt collectors work for debt collection agencies, so it makes it easier for people to go to them to collect their debt. We will examine debt collection agencies in this article.
Read: What Is Debt Financing?
What Is Debt Collection Agency?
A debt collection agency is an agency that specializes in collecting debts and generally has a specific niche in which they have massive experience.
It means that some agencies could only deal with unsecured debts higher than $1000 or such.
When a creditor works with a debt collection agency, they typically get a certain commission from the debt they collect.
This means you actually don’t pay them upfront; you bet on them doing their job correctly.
Debt collection agencies either collect the full amount or go for settlements where they pay less than the amount they owe, but they give cash directly.
How Do They Work?
There are many different ways debt collection agencies try to collect the debts and since contacting the debtor is actually a hefty job where you need to be extremely careful about what you can say, how you can contact them, and other legality issues, debt collection agencies takes extreme care with that.
They generally either send a letter or make a phone call to the debtors to convince them to repay their loan.
However, not every day can the agencies reach out to the debtor with the contact information the creditor provided them.
When that happens, they go and search about them and find a way to contact them.
This is a lengthy process and could be problematic depending on how tough the debtor is.
Sometimes, agencies search for the debtor’s assets and let credit bureaus know about the details of these debts, and since this affects the credit score, the debtor might be willing to come to an agreement.
To conclude, debt collection agencies are agencies to help creditors to collect their debt from the debtors they owe.
Debt collection agencies take over the entire process and make sure that the debtor pays the amount they owe or at least an amount that will satisfy the creditor.
They do this by using different means such as searching the debtor and their assets, trying to contact them, or coming to an agreement about the debt.
They sometimes use ways that would threaten the debtor’s credit score or similar techniques to get the debt resolved faster than it normally would have.
Note: According to The FDCPA, debt collection companies are not allowed to use abusive, unfair, or deceptive practices to collect debts from anyone. If you’re facing any such issue consider hiring a debt relief company for debt management.
Amit Gupta is the founder of National Planning Cycles, a company that helps startups, individuals, and small businesses with their financial planning. He has a vast amount of experience in the finance sector, having managed Google Play accounts for some of the world’s most successful unicorns. Amit is an expert in his field, and he uses his knowledge to help others achieve their individual goals.