Understanding Collection Agencies
For an understanding of collection agencies it first helps to know what they are. Collection agencies are independent firms that are not on the staff of companies owed money. In other words they can be called outside firms hired specifically to collect debt.
Collection agencies are in every state of the union. This doesn’t mean they collect debt in just the state in which they are domiciled. They can be licensed in numerous states. Each state has its own laws on collection agencies licensing. So understanding collection agencies require a little bit of research into your state’s laws should you have been contacted by a collection agency.
Understanding collection agencies also means understanding the various federal and state laws governing their permissible and prohibited debt collection methods. This goes hand in hand with the research mentioned above.
While you can readily find horror stories about collection agencies on the Internet they do fill a vital function. They collect debt owed to businesses which the business has been unable to collect using in house staff. The businesses will either assign the debt to a collection agency or sell it outright.
Understanding collection agencies exist because people or other businesses don’t pay their debts helps to mitigate their overall less than shiny reputation. If you were in business and tried to collect a debt and were unsuccessful, you would probably contemplate using a collection agency.
If you are a small company, it is probably cheaper to use an outside source than it is to use valuable employee or your own time pursuing collection. If you had to sue the debtor, your legal costs alone could exceed the debt amount.
Collection agencies, on the other hand, have the resources to pursue the debtor because they handle many cases at once and are either on a set fee or commission or have bought the debt. Or, they may have on staff lawyers who do only court filings and appearances.
By the way, that doesn’t mean they are always acting within the framework of the law. That is why it is important to know the federal and state laws. Knowing the local rule established by your local court system is also a big plus. The collection agency may be in violation of one or more of those rules.
Generally speaking, you will not be contacted by a collection agency if you are less than 90 days behind in your payments. In today’s world, that timeline has been stretched to 180 days by some companies. They prefer to deal with you directly for this length of time because it saves them money and they want to keep you as a customer. That is good business.
You do need to keep in mind that 90 days may be the outer limit before the company turns over your file to a collection agency. While timelines are not an absolute to understanding collection agencies they do help you understand where your boundaries end.
Of course, if you are contacted by a collection agency, that in itself will help in your understanding collection agencies education. If you can remember collection agencies have to live by federal and state rules, laws and regulations, you should be able to keep the interaction if not totally in your favor at least friendly with a favorable debt work out plan.
Understanding collections agencies means you know they are strictly limited in whom they are allowed to contact, what they are allowed to say when in discussions with third parties and what can be said to a debtor to get him to make a payment. You can even tell them in writing not to contact you again. They will go away but your debt won’t.
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