Finance

What is a Debt Collection Agency and How Does it Work?

It is very important to maintain a good credit rating for your company. The unpaid invoices slow down your cash flow and impact your credit rating, thus, jeopardizing and tarnishing your company’s reputation. So, you need to be on your feet soon to prevent any such circumstances. The sooner you get paid the better. You must be prompt on your part to send out invoices and take care that they do not go unpaid for more than 45 days. However, if your invoice is unpaid for 60 days, you must seek the help of a professional debt collector who works individually or a debt collection service agency. 

What Is a Debt Collection Agency?

A lot of people are confused about what a debt collecting service agency is. Often, debt collectors operate independently, and sometimes they work for agencies. At times agencies act as middlemen, collecting the customers’ felonious debts. Usually, these debts are the ones that have passed 60 days from the original due date. The expert from debt collection service agencies helps in remitting debts to the original creditor.

How does a business debt collection agency work?

The debt collecting agencies aid in the collection of commercial debts on behalf of your business. Even if you own a small company and experiencing debt situation, you can still hire a collection agency for small business to meet your needs. They work with a variety of creditors and in most cases do not own any debt of their own. They are experts in collecting debt and avoiding litigation. You are the one in control of your business and the amount payable by your customer. The agency functions as a middleman between you and your customer, collecting the payment. They generally charge you a percentage of the money they have collected as their service charge. 

Usually, most agencies connect debtors through phone calls and letters. But in the digital era, online debt collection services have gained popularity. Besides contacting debtors through different communication channels, the service providers also –

  • Reach the customer directly for requesting full payment. Not to mention, many a time, debtors upon receiving an email or call from service agencies, pay in full promptly.
     
  • In case the debtor is unable to pay in full, the service company negotiates with the person after a thorough consultation with you.
     
  • The agency initiates legal action against any person who fails to pay in full or fails any payment agreement after 180 days to recover your money.

However, filing a lawsuit against a debtor is the last resort. Different countries have various rules for debt collection. Unfortunately, no lawsuit from any country ensures quick recovery of payments. 

Restrictions on Debt Collecting Agencies

A bad reputation precedes debt collectors. Several complaints have been filed against them on grounds of harassment. So, you must be aware while you choose a debt collecting service. There are several collecting services you can opt for if you search for a debt collection service Houston. Sadly enough, the Federal Trade Commission receives fewer complaints in a day about debt buyers than debt collectors. 

Thus, the agencies are put through certain limitations regarding the collection of debts by the Fair Debt Collection Practices Act (FDCPA). The limitations are set so that the companies do not violate consumer protection law. This includes protection from deception, unfairness, and abusiveness by the debt collectors. As per the rules:

  • A collector needs to be respectful, honest, and law-abiding. The collector is supposed to provide you with verified details about the debt. If they fail, they must immediately stop any persuasion of further debt collection. If they have verified documents about your debts, they must guide you about the payment and should not do anything without consulting the business that has hired them.
     
  • They must never threaten a debtor or discriminate based on race, sex, age, or other characteristics. They can never publicize any debt a debtor owes to any business or company. They must never deceive to collect a debt, nor will they intimidate a debtor with law enforcement agents or threaten them with false arrest threats.
     
  • Collectors are also time-bounded. They must call a debtor between 8 A.M. and 9 P.M. Also, they must not pester a debt that is more than seven years old. 
     
  • Debt collectors must have accurate and complete records, so they send notices to people who don’t have a debt. They also must not threaten to sue anyone for debts that are beyond the decree.
     
  • The debt collectors should never harass you or treat you disrespectfully. They aren’t supposed to call you at random hours without permission. The official time to call as per guidelines is between 8 A.M. to 9 P.M.

So, a debt collecting agency is undoubtedly required to maintain a good credit report. But, while choosing one, you must be aware of picking a reputable collecting agency that will abide by the laws of the state. Nelson Cooper & Ortiz is a reputable agency that helps in maintaining your credit score by ensuring full payments of your debts. 

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