What Is A Collection Agency And How Do I Know If I Need One?

Debt collection agencies act on behalf of creditors to collect debts when the creditors don’t have the time or resources to chase down severely overdue debts for themselves. Collection agencies specialize in this kind of work which means they have staff that specializes in debt collection, which covers a broad range of legal and negotiating skills, and a streamlined process for pursuing 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.

Typically, collection agencies do not take over the debt. The debtor does not actually owe the agency any money. It still owes to the creditor. But the collection agency will provide evidence (known as debt validation) that they have been empowered to collection the debt on behalf of the creditor.

From time to time collection agencies buy old accounts hoping that the debtor is in a better position today to pay the bill.

Every US based collection agency is subject to the F.D.C.P.A and is not permitted to collect on fraud accounts. They will take every legal remedy available to enforce the collection of accounts that are outstanding. This includes going to court.

This is when you hire a debt collection agency -

A debt collection agency will approach the issue through a multi-stage writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when -

A debt collection company will attempt to collect via a letter writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when – the debtor has or thinks he/she has a valid defense when the amount owed is disputed in full there is faulty product the debtor’s solvency is in doubt or there is the possibility of bankruptcy

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.

Mallory Megan is employed by a collections agency that works with a debt collection lawyer. She also does stories on business, finance, the credit industry and collections agencies.