Dealing With Debt Collectors
If you owe money, debt collectors generally have a right to seek repayment. There are laws in place to protect you from being treated unfairly by debt collectors.
Watch the video on how to deal with debt collection to:
- check your rights when dealing with debt collectors
- find out where you can get help with debts.
What To Know About Debt Sold To Collection Agencies
Reading time: 4 minutes
Maybe youve recently faced a serious financial hurdle and missed making payments against a credit card balance. Or maybe youre a few months behind on your utility bills. At first, youll find yourself answering phone calls from your creditors trying to get you to pay. Eventually it might take three months or up to six the phone goes quiet, and you think theyve given up.
Unfortunately, its more likely that the debt has been sold to a collection agency, and you can be assured that theyll try their best to collect. The creditor may have given up, but the collection agency wont thats how debt collectors make their money.
In addition to being a tremendous hassle, being pursued by a collection agency will likely have a negative impact on your credit reports. Read on to learn how debts are sold to third parties, what to do when a collection agency is trying to get you to pay and how to resolve the issue.
When Contacting Other People
If you have an attorney, the law prohibits a collection agency from contacting anyone other than your attorney. If you do not have an attorney, the agency can contact other people only to find out where you live or work. The collector cannot tell these people that you owe money. In most cases, the collection agency can contact another person only once. These same rules apply to contact with your employer.
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Starting A Debt Collection Case
A debt collector starts a debt collection case by filing a complaint with the court. A copy of the complaint and a document called a summons must be served on the debtor by one of the methods described in Utah Rule of Civil Procedure 4.
In the complaint, the creditor must explain what they are asking for in the lawsuit. It should include the amount owed and if applicable, information about the debt and any buyer/assignee.
The person who filed the case is the plaintiff. The person the case is against is the defendant.
Resolving The Case Outside Of Court
Resolving a case outside of court can save time and money.
The parties can settle the case at any time in the process. The debtor can contact the creditor’s attorney to see if they are willing to negotiate.
One example of a settlement is a payment plan, where both sides write an agreement that they debtor will pay the creditor a certain amount each month for a certain period of time. The amount could be the full amount owed, or it could be for something less than the full amount. The written agreement between the parties becomes an enforceable contract. If the debtor does not follow the contract, the creditor may file a new lawsuit to enforce the payment plan contract.
In some hardship cases , the creditor may be willing to discuss the hardship with the debtor to reach a resolution of the debt.
The parties can hire a mediator to help them work through their dispute and to try to come to an agreement. See the Alternative Dispute Resolution page for more information about the process.
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Full List Of Collection Agencies
Here is a full list of collection agencies and a summary of what each company claims to offer. This alphabetical list also includes our best picks.
Account Management Systems AMS collects commercial debts. Based out of Tampa Bay, this debt collection service collects debts nationwide, charges no upfront or sign-up fees, and only collects money if it recoups your debts.
Alexander, Miller & Associates LLC Alexander, Miller & Associates is a national agency that specializes in large-balance collections. It offers demand letters, commercial credit reports, onsite investigations, prelitigation services and skip tracing. The company states that it has collectors who specialize in trucking transportation and freight, wholesale seafood and produce, restaurant supply, and heavy equipment rental.
American Profit Recovery American Profit Recovery serves a wide variety of industries, including small businesses, lawn care/landscaping and banking. According to the company, its mission is to resolve debt while treating everyone with dignity and respect. It offers clients an online portal to enter new delinquent accounts, monitor progress and get a snapshot of American Profit Recoverys performance.
Should I Hire A Collection Agency If I Have Small
While most collection agencies will collect debts over $50, whether you should hire one depends on how many customers owe you money. If its one or two past-due accounts and its an occasional occurrence, collecting the debt on your own may be more effective. But if you have a lot of customers who havent paid their bill in more than 60 or 90 days, it may be worth calling for help. A good debt collection agency is effective at recovering money owed to you and will do it in an empathetic way.
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When To Hire A Collection Agency
Small businesses typically call collection agencies when theyve gotten nowhere in their efforts and the debt is getting old. Every case is unique, but below are five signs you need collections help:
- New customers dont respond to your first attempt to collect the debt. When theres no payment history with the customer, theres a greater chance theyll refuse to pay.
- Youve agreed to a payment plan, but the customer doesnt follow through. Customers who still wont pay after youve worked out a payment plan are more likely to default on their debt.
- A customer denies the debt is owed. Unless you enlist the help of a collection agency, these debts are rarely recovered.
- The customer makes unfounded complaints about your business, product or service. Most of the time, these complaints are just an excuse to get out of paying the debt.
- The customer has a history of financial irresponsibility.
The longer you let outstanding debts go unpaid, the lower your odds are of recouping your money. Most companies send past-due accounts to a collection agency when they are 90 to 120 days past due. If you wait longer than 120 days, youre far less likely to recover the debt.
Before you call in the experts, there are two steps you can take on your own. First, give debtors a few opportunities to pay what they owe. If your phone calls and emails are ineffective, then send a formal demand letter requesting payment.
What Should I Include In My Offer To Settle A Debt
Youll want to include specific information concerning your account in your letter. Critical details include:
- Your name and address
- The original holder of your debt and the account number
- The current value of your debt
- The name of the debt collection agency and their identifying information
- The amount you want to settle the debt for
- A request to report the account paid to all credit reporting bureaus
- An appeal asking the collection agency to provide you with a letter of acceptance
Your offer to settle the debt should be clear and straightforward. It should express that youre willing to offer partial payment to eliminate the obligation.
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Debt Collection Agencies Purchase Your Debt From Lenders
If you fall behind on your bills, your lender may turn to a debt collection agency to recoup the money you owe.
These agencies purchase delinquent debts from lenders for a fraction of the original amount.
The agency then tries to collect the total debt from you, plus interest and fees. This can be a stressful and overwhelming process, especially if youre already struggling to make ends meet.
However, there are some things you can do to protect your rights and minimize the damage.
- First, know that you have the right to dispute the debt.
- Second, request that the agency only contact you in writing.
- And finally, dont be afraid to negotiate a payment plan that works for you.
What Is The Difference Between A Debt Buyer And A Debt Collection Agency
When you hire a debt collection agency, you retain ownership of the debt. You are simply hiring the agency to act on your behalf to recover the outstanding money owed.
By contrast, a debt buyer is a company that buys the debt from you. Once you sell it, you no longer have any access or control over the account. The debt buyer will use their own means to collect the money owed, including tactics like settlement or even litigation.
Hiring a debt collection agency gives you more control over outstanding debts. And, with a reputable company that handles the process professionally, its possible to collect the money thats owed to you and still retain your customers.
When you sell your debt to a debt buyer, you lose that controland youll likely lose a customer, too. However, the tradeoff is that youll get an upfront payment. If the customer is no longer a viable client, it may be worthwhile to sell the debt to get some of the money back that is owed to you.
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After Your Judgement Is Paid
Once you have paid a judgement in full, the judgement should be discharged at the Court of Kings Bench and at the Personal Property Registry. Check to make sure this is done. You should also let the credit bureau know that you have paid the debt. They will enter this information on your credit record.
Pros And Cons Of Collection Agencies
There are several reasons why businesses turn to a collection agency for help. Many business owners are strapped for time. They barely have a moment to bill customers, let alone chase down late ones. A collection agency takes that off your hands. Sure, theres a fee, but its better than getting nothing if you dont collect it on your own.
You also get legal protection when you work with a collection agency. The last thing you want is to face legal action because of the way you attempted to collect debt. A reputable collection agency knows the rules and regulations. You have less chance of being sued if you hire an accredited and highly rated collection agency.
The collections success rate tends to be higher when you work with a collection agency than if you try to collect the debt yourself.
The biggest downside of working with a collection agency is that there is a fee for doing so. You dont get all of the money you are owed, because the collection agency takes a percentage for their efforts. However, it is often better to get some of what you are owed, rather than none at all.
Key takeaway: The benefits of hiring a collection agency are that you dont have to chase down clients, nor do you have to worry about being sued if youre collection tactics are too aggressive.
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Use This Sample Letter To Settle Your Debt With A Collection Agency
You might be wondering how to write a good settlement offer letter. Weve got you covered.
Send a Debt Lawsuit Settlement Letter to start the process of reaching a debt settlement. You can use SoloSuit to draft a customized letter in just minutes.
Alternatively, you can use this settlement sample letter to help you draft one on your own:
Ic System: Best For B2c Collections
IC System is our choice as the best B2C collection agency. We selected it based on its decades of experience, transparent pricing and track record of recovering debt. Business owners can tailor their collections with two levels of service and price points that IC System offers.
For easier-to-collect debt, business owners can use the two-stage Recovery Plus program that costs a flat $14.95 per account. IC System send demand letters informing the customer he or she is in collections. If your customer pays, you keep 100% of the money recovered.
For harder-to-collect debt, IC Systems Premier Collect Plan, provides credit reporting to the major credit bureaus, credit monitoring, attorney referral services and litigation referral services if legal action is necessary. Customers only pay when money is recovered, and IC Systems fee is 25% of collections.
IC System has been in business for more than 80 years, which gives us peace of mind that this collection agency knows what its doing. It also strives to treat people with dignity and respect, to do the right thing, and be proud of how it recovers debt.
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What To Expect After You Receive A Notice
- You should validate that the caller is representing one of the private collection agencies listed above.
- The private collection agency will ask you a series of questions to make sure theyre talking to the correct person.
- You will be asked to exchange portions of the Taxpayer Authentication Number with the private collection agency to validate each others identity.
- The private collection agency will be courteous, professional and respect your taxpayer rights, while following the laws.
- The private collection agency will work with you to resolve your overdue taxes. They will NOT threaten you. If you feel the private collection agency acted inappropriately, heres how to report it.
For more information you can also view the IRS video Private Collection of Overdue Taxes.
How Should I Choose A Debt Collection Agency
When choosing a debt collection agency, its important to do your homework. Consider the following factors:
- Fees and Commission: A fee structure may include flat fees per account, percent rates on contingency, or a mixture of both.
- Debt Minimums: Collections agencies listed here may collect on an account as low as $200, but often have minimums that are several thousand dollars or more.
- Success and Recovery Rates: Ask for a company’s success rate and do the math to see if the fees are worth what you will get back.
- Customer Service: Check online reviews for reports of the companys customer service.
- Accreditation: Top debt collection agencies are licensed in your state and accredited by trade associations like the Association of Credit and Collection Professionals and the International Association of Commercial Collectors. They also are members of these organizations.
- Litigation: You can look up enforcement actions the Consumer Financial Protection Bureau has taken against debt collection agencies by searching for the company on the CFPB website.
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The 5 Best Debt Collection Agencies Of 2022
- Best for Low Invoice Amounts: Prestige Services Inc.
Extra commissions charged on older invoices
Added fees for international invoices
Atradius Collections has been in operation since 1925 and is a leading commercial debt collection agency. Based in the Netherlands, the company is a member of several different debt collection trade associations throughout the world, including the International Association of Commercial Collectors , the Credit Services Association, and the Federation of European Credit Management Associations.
Atradius Collections supports more than 15,000 customers and handles more than 90,000 cases of commercial debt per year. Atradius Collections provides commercial debt support worldwide, working in more than 30 different countries.
Unlike many companies, Atradius Collections does not have a required minimum on debt. Its fees are dependent on your invoice amount and client location. The commission fees were not readily available on the Atradius Collections site.
For an invoice that is 180 days overdue or more, Atradius Collections will charge you an additional 2% commission on top of its standard rate. If you have international clients that have not paid their invoices, youll pay an introduction fee and a higher commission than if they were based in the United States.
What Types Of Businesses Are Impacted By The Gramm
The GLBA covers any institutions that provide financial services, including:
The law covers a wide variety of institutions that handle finances and can include institutions one may not expect, such as car dealerships that collect and distribute the personal information of their consumers or retailers that grant credit cards to their customers.
Protecting Your Customers Nonpublic Personal Information
When a consumer decides to work with a specific financial institution, they must be able to trust that institution with their private information. Often, the information given to these institutions by their customers can be highly confidential and leave the customer vulnerable to a number of personal and legal issues should their information be shared or leaked to the wrong party.
Under the Gramm-Leach-Bliley Act, financial institutions are legally obligated to protect all of their private consumers nonpublic personal information . An NPI is defined as the individually identifiable financial information collected by a financial institution that cannot be found in the public domain. This can include information like:
- Consumer reports
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Tips For Dealing With A Debt Collector
The following steps can be useful if you find yourself being contacted by a debt collector:
- Verify the debt is legitimate. When a debt collector first contacts you, they will probably tell you the amount owed and the creditors name. In some cases, a debt collector will send a letter to the consumer with this information. Make sure this information is accurate.
- Request an end to communication. When a creditor receives your written request to stop contacting you, they must stop contacting you . However, it is important to note that this does not mean the debt goes away â the debt collector can still take legal action to collect the debt.
- Consider limiting communication by hiring an attorney. Once debt collectors know you have an attorney to handle the debt, they will contact the attorney instead of you.
Many individual states have enacted their own versions of the FDCPA, which may provide additional protections. You can find your states regulator at the Conference of State Bank Supervisors State Banking Directory