The What And When Of Collection Agencies.

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, when you hire a collection agency, they are assigned the job of collecting the debt. Normally, if the agency is successful in debt collection the collection agency will retain a percentage of the amount collected as payment for services.

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.

Purchasing old debts is a big business. The collection agency is hoping that you would rather pay than get sued.

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 that the debt is past due there is not a valid dispute.

A debt collection company will approach the situation through a multi-stage letter writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when the debtor thinks he has a valid excuse.

The amount past due is disputed when there is an unrelated claim against you, the debtor’s solvency is in doubt or there is the possibility of bankruptcy that offers security to recover or a possible prejudgment remedy

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 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.

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