What is a Debt Collection Agency?
A debt collection agency or debt collector is an organization that is used by lenders to recover debts from people who have defaulted on the loan for a long time. Lenders do not go in for this organization; they try to recover the debt through several means. They only contact the debt collectors when all attempts to recover the money fail.
How Do Debt Collection Agencies Work?
These agencies specialize in recovering debts for lenders. They have all the tools to track down a borrower who has changed his or her location. They can call you to inform you about their position and the fact that the lender has handed the situation over to them. If they want to confirm your contact details, they can call your relatives or anyone close to you. However, they are not allowed to disclose the actual reason for the call. Debt collectors can only call you from 8 am to 9 pm.
These agencies do not only call you, they can also show up at your doorstep in an attempt to force you to pay the debt. If they succeed in getting the borrowing to pay back the cash, the debt collection agency will get a percentage of the money.
Debt Collection Agency Regulations
If the lender has an in-house debt collection team, they are not bound by the Fair Debt Collection Practices Act (FDCPA) but a third party debt collector is. If a third party debt collector goes ahead to collect a debt that has been written off as uncollectible, the debt collector has gone against the act. Debts that are uncollectible include debts that were written off when the borrower filed for bankruptcy. A collector can also not decide to collect a debt on which the statute of limitation has expired.
There is also a limit to how often a debt collector should contact the defaulter. If the debt collector contacts the borrower too frequently, it will be counted as harassment.
What to do when you get a call from debt collection agencies
You may not be expecting a call from a debt collection agency but if such a call comes through, you will need to act upon it. You are most likely being called to settle a debt that is long overdue. When you get notified to pay your debt, you can take the following steps to deal with the problem. Remember that it will be stressing when the collector is already on your neck.
- The first thing to do is to double check if that debt is actually yours. If you remember how that debt was created, fair enough. If not, look through your credit report for clues. If you do not remember that particular debt, it is possible that the debt is an error and that why you did not pay it back in the first place. In the end, you should cross check the debt and make sure it is actually a loan you took. If you establish that the debt is actually yours, you can proceed to the next step. If not, you can file a dispute.
- The next thing to do is to calculate the amount you can pay. There are two payment options – you can choose to pay a lump sum or in installment. Paying the debt with a lump sum is the most effective way of clearing your debt. It allows you to settle the debt once and for all. It can also give you an opportunity to negotiate for a lower amount. However, negotiating for a lower amount is only great if the collector decides to take the amount as the full payment. It is, however, difficult to choose the lump sum if you do not have any cash stashed away.
The installment payment allows you to pay in small amounts until you clear the debt completely. You can negotiate with the debt collector if you decide on the method you will use to collect the debt. If the debt is closer to the statute of limitation, you have more negotiating power.
- Once you have decided on how to repay the debt, you can contact the debt collector. You can contact them yourself or let a third party do that. There are professionals who do these negotiations on behalf of the borrower. However, if your goal is to save money, you should consider negotiating it yourself. Third parties are quite expensive.
- After contacting the debt collector and coming into an agreement, you can proceed to make payments.
Can the collector garnish my wage?
If the account is long overdue, the collector or creditor can decide to use force. They can contact a judge to issue a garnishment order against you. With this, the creditor or debt collector can take a portion of your salary to repay the debt until you are able to complete payments. The collector cannot take all your salary as it is against the law. They are only allowed to take a portion and then they leave the rest for you to take care of your living expenses. Certain types of income such as child support cannot be garnished.
Can the debt be deleted from my Report?
If the debt appears on your credit score, you will have to take steps for it to be removed. If the collector agrees that they will remove the collection from your account when you repay the debt, you can go ahead and clear the debt. However, you should put down a written agreement that clearly indicates what you and the collector agreed on. Your credit score will improve if the collection is eventually taken off your credit report.
You will only be contacted by a debt collector if you do not pay your debt on time. You can avoid this problem by always clearing your debts. You should also check your credit report regularly, to make sure there are no debts.