Behind on your debt payment and stressed about the whole repayment process to some unfamiliar debt collection agency? Worry not. Here, you can learn all the basics about the whole debt collection process, how these debt collection agencies work, what their incentives are and how you can ease your stress in the whole process.
How does this debt collection business work?
When debtors refuse to pay or are long due on their debt payment then creditors take the help of some specialized debt collection agency. This agency acts as a middleman between the debtor and the creditor. They collect the debts from the delinquent debtors using various ways and then remit it back to the creditors.
What’s in it for the debt collectors?
Debt collection agencies can sometimes get really expensive. They demand a share in the collected debts as their fee for the service. These shares can go up as high as 45% of the collected debt. Imagine how much that would be worth if the debt is in thousands of dollars! Reputed and established collectors even clearly state that they won’t take cases that are worth anything less than $200.
How do they operate?
Debt collection agencies work on debts that have gone delinquent, which means they are due for more than 60 days and have no sign of payment in the near future. Although there are many debt collectors who work independently, the majority prefer to work in a more systematic and organized manner with an established debt collection agency.
As mentioned above, these debt collection agencies act as a middleman between the debtor and the creditor. They work on a variety of debts such as medical debt, credit card debt, automobile debt, personal debt, student loan debt, business debt, and even utility bills. Different debt collectors have their own specialized way of dealing with delinquent customers. Initially, they encourage the customers to settle the debt without dragging it to turn into a legal fight through formal meetings. During the course of these meetings, they might even consider reducing the debt to some extent to recover as much as possible at the moment. If nothing works then the last step is to sue the delinquent debtor in the court of law.
In this way, debt collection agencies not only gain their hefty commission but also help creditors recover their bad debts and not bear complete losses.