What is a the purpose of a Collection Agency & when should I use?
JR Rooney
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, 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.
Purchasing old debts is a big business. The collection agency is hoping that you would rather pay than get sued.
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.
You should use a collection agency when -
the debtor has the ability to pay but ignores you 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 has or thinks he or she has a defense the amount owed is disputed there is an unrelated adverse claim the debtor's solvency is in doubt or there is the possibility of bankruptcy there is security to recover or a possible prejudgment remedy
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.
When the creditor does not wish to do additional business with the client and the creditor is not interested in the outcome of a debt collection, beyond getting his money back, they can sell the debt to a debt buyer.
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