With years of experience working in the debt relief and collection industry, I have gained a unique perspective on the intricate workings of debt collection agencies. Did you know that some creditors use data attributes, such as a “likelihood to pay” score provided by credit bureaus like Experian, to assess your payment capabilities? Should you never pay a debt collection agency?
Such data can be used to determine whether the creditor should pursue legal action against you for debt collection. In this article, we will delve deeper into the debt collection process and explore the various steps involved.
The Debt Collection Process: An Overview
It is important to note that your account typically does not get directly sent to a debt collection agency when you fall behind on payments. The creditor will first try to contact you through phone calls and text messages to bring your account back up to date. Initially, you may receive several calls per day, but the frequency of these calls will gradually decrease over time.
After 30 days or at any point thereafter, if you have not responded to the creditor’s attempts to contact you or have failed to make any payments, they may then choose to sell or send your debt to a debt collection agency.
The debt collection agency will then try to contact you through various means, including phone calls, letters, and emails. These agencies often use specialized software to track down individuals with outstanding debts, and they may employ skip tracing techniques to locate individuals who have moved or changed their contact information.
If the debt collection agency is unsuccessful in its attempts to reach you, it may choose to take legal action against you, such as filing a lawsuit or obtaining a judgment. This can result in wage garnishment or a lien on your property.
Example Debt Collection Agencies in the US
Here are some of the biggest debt collection agencies in the United States:
Each of these debt collection agencies operates differently, and it is essential to understand their tactics to effectively deal with them.
The Truth Behind Debt Collection Agencies: How They Work and Get Paid
Have you ever wondered what happens when your debt is sold to a debt collection agency? In this article, we will explore the intricacies of debt collection agencies, including how they get paid, and provide you with valuable insights into the debt collection process.
What Happens When Your Debt is Sold
If your creditor decides to sell your debt to a debt collection agency, the agency becomes the new creditor to whom you owe the debt. In the event that you attempt to validate the debt from the debt collection agency, the original creditor will likely have sent proof of the debt (such as a truth in lending disclosure) to the collection agency upon sale.
It is important to note that the new purchaser of the debt may assume that they will receive debt validation requests, which is why some individuals may view debt validation companies with suspicion. The debt validation process is often automated, and the new purchaser of your debt is unlikely to let it go easily.
Even if your debt is sold to a debt collection agency, you may still be responsible for the debt. It is crucial to work with the debt collection agency to develop a repayment plan or negotiate a settlement to avoid legal action.
Beware of Credit Repair Scams
When seeking assistance from credit repair companies, it is essential to ask what exactly they can do for you. For instance, if a credit repair company disputes all the debt on your credit report without considering its legitimacy, you may want to reconsider.
While the creditor may remove the disputed debt temporarily, your credit score could increase temporarily as well, and then the debt would reappear shortly after. Therefore, it is vital to work with a reputable credit repair company to ensure that your credit score is not further damaged.
Understanding the Notification Process
When your debt is sent or sold to a debt collection agency, you will receive a notification mail within five days from when it was sent or sold to the agency. The mail should include the amount the debt collection agency thinks you owe, the name of the creditor, and instructions on how to dispute the debt in writing.
How Debt Collectors Get Paid
Debt collection agencies make money by receiving a percentage of the debt they collect from individuals. Typically, they receive a percentage of the amount they recover from the debtor, with the exact percentage varying depending on the type of debt and the agreement between the creditor and the debt collection agency.
In some cases, the creditor may offer a different percentage based on how long the debt has been past due, with a higher percentage being offered for very old debts. This incentivizes the debt collection agency to put in more effort in recovering the debt.
If the debt is sold to the debt collection agency, the agency becomes the owner of the debt, and therefore retains the entirety of the payments received. This can provide additional motivation for the debt collection agency to recover the debt as quickly as possible.
Debt Collection Agency Rules: What You Need to Know
While debt collectors may get paid based on what they bring in, they are still required to abide by specific rules and regulations. Debt collection agencies must adhere to the rules set forth by the Fair Debt Collection Practices Act (FDCPA), which was designed to protect consumers from unfair and abusive debt collection practices.
Here are some of the FDCPA rules that debt collection agencies must follow:
- They cannot reach out to any other person, such as your family or contacts, in an attempt to communicate with you. They can only communicate with you through your attorney or a consumer reporting agency.
- They cannot call you earlier than 8:00 am or later than 9:00 pm.
- They cannot use any misleading or false information regarding the debt.
- They cannot add extra charges, fees, interest, or any additional charges on the original outstanding debt.
- They cannot use abusive language or harass you about the debt.
- They cannot call your employer or your workplace if your employer prohibits such communication at the workplace.
Conclusion
The debt collection process can be overwhelming and complex, but understanding how it works can help you take the necessary steps to avoid legal action and resolve your debts. Remember to keep in mind that there are rules and regulations that debt collection agencies must follow, and if you feel that you are being treated unfairly, you have the right to take legal action to protect yourself.
