Collection Agencies

By Dylan Mazeika

A collection agency collects debts on behalf of creditors who have not been paid for products or services. There are some collection agency issues that businesses typically care about. Before you decide to hire a company to retrieve your debt, it's a good idea to review these collection agency FAQ to know the common rules and understand how the collection process works.

By reading this collection agency FAQ, you'll get a better understanding of agency procedures for collecting unpaid debt.

Q: How does a collection company make money?

A: Collection agencies make money either on commission or when they buy debt outright. Agencies that work on commission get to keep a percentage of the money they collect and then forward the rest of it to the creditor. If the agency buys the debt outright, usually for less than what is actually owed, the agency keeps the entire amount collected.

Q: What are some of the restrictions related to a collection agency?

A:Collection agencies are supposed to abide by certain regulations that protect consumer rights. This is one of the most common collection agency FAQs because people wonder exactly what practices are allowed.

Collection agencies can only call between 8 a.m. and 9 p.m., in the debtor's time zone. Agents must also identify themselves and explain why they are calling. When they call, agents can't lie or imply they will put out a warrant for the debtor's arrest if they fail to pay. Further, if a debtor asks a collector to stop contacting him or her via a written request, the collection agency must stop.

Q: What can a collection agency do to a debtor?

A:A collection company has the power to report the debt to the credit bureaus, where the item will remain listed on the debtor's credit rating for seven years, even it's paid off. As specified in Section 605 of the Fair Credit Reporting Act, this limit is established by the date of original delinquency.

If an agency is working on commission, it can also recommend that the creditor sue to collect. And if the agency owns the debt, they can sue on their own. It's worth noting that the costs associated with a lawsuit are high, especially when factoring in attorney fees and court costs. So the actual chances of a lawsuit are often substantially less than those that get "suggested" to a debtor.

Q: What can a collection agency NOT do to a debtor?

A: Due to consumer protection laws, the list of what a collection agency cannot do is a lot longer than what they can do. For example, an agency can't seize a debtor's assets, bank accounts, or paycheck unless they've won a lawsuit and received a judgment awarding restitution.

They are also forbidden from making any kind of public statement regarding the debt, including any type of social media or similar web-based postings. Finally, collection agencies are not allowed to get a debtor fired from his or job and are explicitly prevented from making any kind of verbal or physical threat.

Q: What is collection agency procedure to collect unpaid debt?

A: The collection agency usually writes a letter and then follows up with phone calls. Usually, the agency looks for current contact information and then attempts to inform the debtor of how much is owed and how he can discharge the debt. Often, a collection agency makes periodic calls until the debt is paid. Once the debtor pays, the creditor can then get paid.

Collection agencies can also report nonpayment to credit bureaus making it more difficult for the debtor to obtain credit later.

To get answers to your collection agency FAQ, use BuyerZone's free request for price quotes form to get matched to multiple collection professionals who can address your needs. For more detailed information about how collection agencies work, read our comprehensive Buyer's Guide.