Is it worth hiring a debt collection agency? Debt is often a word avoided by people as it invokes a sense of unease in the reader. Nevertheless, it is an integral part of most businesses. For those that are uninformed, debt is the amount owed by the borrower to a lender. Companies and businesses can be both debtors and lenders to multiple parties at the same time.
Usually, debt is paid in regular intervals by the borrower to its lender. The amount owed by the borrower also must be paid within a set time frame to the lender. The amount paid is usually more than what is borrowed because of what is called an ‘interest’.
Due to all these factors, it is not all that uncommon for payments to be missed by borrowers. In case of missed payments, it is then up to the lenders to enforce the collection of debt. Many businesses lose a lot of money from uncollected debts and have sought out other alternatives for debt collection. The debt collection agency was birthed from this very need by the businesses.
Read on – Is It Worth Hiring A Debt Collection Agency?
Debts are usually paid by a borrower over a period of time at regular intervals, interest included. Debts that are unpaid or at least 60 days past due, however, are then called ‘delinquent debts’. When debts become delinquent, lenders begin looking for other ways to collect their debts owed to them.
A debt collection agency helps businesses reclaim their delinquent debts from their borrowers. Many agencies operate in different ways with many of them specializing in different kinds of debt. Some agencies act as the middleman between the creditor and the debtor. They remit the lender and collect the delinquent debt of the borrower.
There are multiple types of debt that a debt collection agency collects and some even specialize in specific types. There is debt that stems from personal loans, medical bills, credit cards, and business expenses to name a few. Agencies can specialize in specific debt collections pertaining to the length of delinquency and amount. An example of this would be debts older than 3 years or less than 500 dollars.
If a delinquent debt proves to be difficult to collect, a debt collection agency opts for alternative methods of collection. Borrowers may negotiate with collection agencies to pay less than what is owed to the lender. Alternatively, debt collectors may take especially stubborn debtors to court and demand payment. A debt collection agency is usually paid a percentage of the amount collected from the borrower.
Debt collectors are often given a bad reputation by the media and pop culture references. While it is difficult to collect money from those unable to pay, debt collection agencies are simply doing their job. A proper debt collection agency operates in an appropriate, ethical, and professional manner at all times.
A debt collection agency contacts the delinquent borrower via phone or mail to negotiate the collection of their debts. If they can not be contacted, an agency would utilize everything in their means to do so. This includes investigators, databases, and bank statements. Debt collectors use the information gathered to see if the debtor has the ability to pay their debt.
Debt collectors are strictly not allowed to take forcible possession of the borrower’s assets to pay the debt. In the event of non-payment or non-compliance, the debt collection agency would take the borrower to court. The court may then allow debt collectors to begin taking money from the debtor’s wages and bank accounts. Even then, permission is needed from the responsible parties.
Debt collection is usually a difficult process. Because of this, many complaints are horror stories are made by the affected parties. To combat this, rules and regulations limiting how debt collection agencies operate were put in place by the regulating bodies.
Debt collectors are legally required to provide verification of the debt if requested by the borrower. The collector must then stop any activities related to the collection and provide the debtor with a written notice. If verification can not be obtained, then the debt collection agency must stop collecting from the borrower.
Everything in the process must be treated ethically and professionally. Debt collectors are not allowed to publicly disclose any debt they are to collect. Everything must be transparent and deceit, forgery, or intimidation is strictly not allowed to be used in the collection. Debt collectors are also strictly forbidden from discrimination.
A debt collection agency must also respect those they collect from. They must adhere to the law and not pursue any debts past seven years. Their records must be accurate and complete with no misinformation included. Formal notice must be made prior to commencing collection activities by the agency.
Many businesses opt to collect their own delinquent debts. While it is doable, multiple businesses will find that it is a very difficult task. There are numerous factors involved in collecting delinquent debts that prove to be too much for certain businesses.
Lack of personnel is a major factor of being unable to collect delinquent debts for some businesses. There is no one the business can assign or dedicate the time needed for the task. Time is another major factor as collecting these debts can take weeks and even months.
Another reason businesses struggle to collect delinquent debts on their own is volume. The number of debts that the business needs to collect may be too high or too much for the staff. Those untrained in debt collection may find it difficult to manage this.
Lastly, there may simply be a lack of knowledge about debt collection that impedes the task. As previously discussed, there are many intricacies, laws, and regulations involved in debt collection. Not just anyone should be made to perform this highly technical task.
It would not be an overstatement to say that debt collection is a highly technical task. Because of it, it requires highly technical workers and skilled agencies. Delinquent debt collection needs to be done right otherwise more problems will arise. It is important that one stays informed about debt collection and how to do it properly.