Things to Know Before Hiring a Collection Agency
Debt Collection Agencies are companies that act as middlemen between the consumer and the creditor. The agency will negotiate with the consumer to collect payment in full or reach a settlement amount. They can also represent the consumer in a dispute over the debt. Most collection agencies are contracted for a specified period of time. Once the contract expires, the agency may return the account to the creditor, or replace it with another agency. Here are some things to know before hiring a collection agency.
The Federal Trade Commission (FTC) regulates collection agencies. The agency that collects a debt may not always be a third party. It can be a subsidiary or department of the original debtor. First-party agencies generally get involved early in the debt collection process, and they have a better incentive to maintain a good customer relationship with the consumer. They can also sell the debt to another collection agency. The constant sale and re-sale of debts has sparked doubt about their accuracy, and consumers may not always be able to determine where a particular debt originated.
Before hiring a collection agency, it is important to understand how the process works. First, an agency will assess the likelihood of success. Many collection agencies carry thousands of delinquent accounts, so they will prioritize which ones they want to pursue. If the chances of successfully collecting money are low, a debtor with poor credit will be given low priority. After determining which accounts are likely to succeed, the agency will pursue the account aggressively. Click here for more information about collection agency information.
Second, it is important to understand the difference between a third-party and a first-party agency. A third-party collection agency is separate from the original creditor. A first-party agency has no obligation to maintain a positive relationship with the consumer and will generally take a more aggressive approach to collect money. This is especially important for consumers with bad credit. It is also important to understand that the FTC has imposed strict rules on debt collectors.
The third-party agencies are often subsidiaries or departments of the original debtor. These agencies may be subject to different legislation than a third-party agency. The federal government administers the Fair Debt Collection Practices Act and the Fair Debt Act, but most collections are conducted by first-party collection agencies. While there is a difference between the two types of collection agencies, a third-party agency has a higher level of consumer protection.
Before pursuing a debtor, a collection agency must evaluate the likelihood of success in pursuing the account. Its members are bound by a code of ethics and other standards of conduct, including treating consumers with dignity. Additionally, collection agencies must designate an officer with authority to handle disputes between creditors and their clients. A debtor with bad credit may be a low priority because of the high probability of collecting the money. However, the debtor’s creditworthiness is a primary factor when choosing a collection agency.