Collection Agency: What They Can and Cannot Do!

Most creditors usually have problems getting people who owe them money to pay. Thus, they hire a third party to do collect the payments for them. Such agencies are called collection agencies. A professional collection agency is very useful to a creditor especially if the debt has not been paid for a longer period. This way, the creditor transfers the burden and headache of sending letters and making phone calls to the debtor. The downside of hiring a collection agency is that they charge about fifteen to twenty percent of each debt collected.

In the past collection agencies sometimes used harassment to get a debtor to pay his debts. Today, there are laws that forbid a collector from doing so. Harassment usually comes in the form of threatening letters and multiple phone calls. Representatives from the collection agency can reach the debtor by fax, mail or telegram, and phone, but not in a threatening or harassing manner. A collection agency can be fined if it does not stop from harassing a debtor after it has been told to stop. The collection agencies are governed by the state laws related to collection agencies and the Fair Debts Collection Practices Act.

Most collection agencies usually buy off large quantities of bad debts for a small amount of the face value. After which, the debtor now owes the full amount to the collection agency. The profit comes from the difference between the price of the purchase and the collected amount from the debtors.

The letters used by collection agencies are hardly personal ones. They are usually friendly at the start and gradually progress to uncompromising demands. The very first of the letters would contain a reminder to the debtor or recipient that he has the right to contest the debt's validity in writing. The agency would also give the recipient confirmation after the debt has been verified with the original creditor.

While collection agencies may sound that they would sue the debtor, this is less likely to happen. Usually, collection agencies just send more letters and do more phone calls that are scripted.

There are things that collection agencies cannot do. They cannot legally confiscate a debtor's asset, bank accounts, or paychecks unless a judgment has been awarded them from a successful lawsuit. Collection also cannot go about making disclosures or public announcements related to the debt, especially to the credit bureau. It is not legal for an agency to have a debtor fired from a job and to resort to physical violence or threats.

Most often a debtor would pay off the debt because of feelings of fear, guilt, intimidation, and also a complete lack of understanding of the legality of the situation. Because collection agencies continuously make demands, the debtor may take the threat as personal and pay the debt. Not many debtors are aware of their legal rights. Thus, feeling powerless, they would succumb to the demand of the agency. In truth, the two real damages an agency can do are to report him to the credit bureau and file a case against him.