The Basics of Debt Collection

Debt collection is the process of seeking payment of a past-due debt that is owed by an individual or business. A debt collector could be a collection agency or a lawyer who pursues payment of a debt as part of their business. Some companies will purchase past-due debt from creditors and businesses to try to collect them. These companies are known as debt collection agencies, debt collection companies, or debt buyers. 

What Is Debt Collection?

If you have past-due bills unpaid credit card debt, or a loan that’s past due, you might be contacted by a debt collector looking to retrieve the money you owe. If you’ve co-signed a loan or are an authorized user on a credit card, you may also be contacted by a debt collection agency. 

Overdue debts can range over a wide array of debt and might include:

• Car loan
• Personal loan
• Medical debt
• Credit card debt
• Student loan debt
• Unpaid utility bills

Debt collectors are typically third-party companies that work on behalf of another company to collect a debt owed to them. The debt collector gets paid a percentage of the debt received as payment for their services. In some cases, an agency will buy out the original debt at a much lower cost in an attempt to recover an old debt.

How Does Debt Collection Work?

Debt collection varies widely depending on the company and type of debt. Some agencies only deal with a certain type of debt, such as unpaid medical bills or student loan debt. Others may only work with older debt. Some agencies will not work with debt that is beyond the statute of limitations, which varies by state. 

As soon as a debt is a couple of months past due, collection agencies can pick up the debt and attempt to collect it. The time range will depend on the company collecting the debt, how much money you owe, and the type of debt it is. 

Before a debt reaches the hands of a debt collection agency, the original creditor may try to collect. They will alert you of the past due amount through written notices and phone calls. The original creditor will try to keep your account current, but will not continue these means indefinitely if you do not respond. At this point, the debt will transfer hands and a debt collection agency will step in. 

Debt collectors will also make an attempt to contact you through letters, email, and phone calls. If they have contact information for your relatives, they may resort to contacting them to reach you. 

If you still do not respond, debt collectors may use your personal banking information – such as checking, savings, or investment accounts – to determine if you are capable of paying the debt. In some states, wage garnishment is an acceptable means of collecting old debts. 

What Do Debt Collectors Do?

Reputable debt collectors follow specific industry rules and will attempt to collect the past due monies in a professional manner. 

When contacting you, they must provide specific details, including:

• The name of the original creditor
• The total amount due, including any late fees or other charges
• The fact that you can dispute the debt

You have thirty days to dispute the debt in writing. If you don’t dispute the debt in 30 days, then the collection agency considers the debt valid and can continue to attempt to collect it.

Collection agencies may send letters to you using the address that you gave the creditor. If you’ve moved, they may find your new address and send letters to your new residence in an attempt to collect the debt. When calling you, they must also follow the statute of limitations within your state. They can call only between the hours of 8:00 AM and 9:00 PM. You should not experience harassment or threats from a collection agency. 

How Do You Pick the Right Debt Collector?

As a business, finding the right debt collector can seem difficult. A great choice is a company that ensures you get back the maximum amount of debt. They are transparent in their fees and methods, and they help you maintain a positive relationship with your clients. Here are six tips to keep in mind when choosing a debt collection agency for your business.

One: Consider ROI not just initial price

The initial price charged by an agency is just one factor to consider when choosing a collection service. Look into how much cash they actually can return to you rather than what they charge, as an agency that charges more up front may be able to collect a much higher portion of the debt, leaving you with more money in your pocket in the end. Ask for an analysis of their rates to see their established results for other companies in your industry, which can help you make a choice based on real returns, not a perceived expense.

Two: Require quality customer service

Collection agencies don’t menacingly stalk debtors anymore. You want to choose a debt collector that attempts to maintain the relationship that you’ve spent years building with your clients. The agency you choose should offer good customer service and should follow all federal and state laws for debt collection. 

Three: Work with an agency long-term

You want to find an agency that will supplement your in-house collection efforts and is willing to work with you long-term on debts. A collection agency that seems themselves as a partner is more likely to work with your clients and provide quality customer service.

Four: Look into their past record

Just like you’d check out a restaurant’s reviews before dining there, you want to ask for referrals and uncover the debt collection agency’s past record with other businesses. You might want to ask the agency itself for referrals, but also check with the local Chamber of Commerce and the Better Business Bureau. 

Five: Check licensing

Under collection agency laws, agencies must be licensed to practice within their state. A simple but often overlooked step in choosing a collection agency is to verify that they hold the proper licensing. 

Six: Ensure appropriate reporting

Choose a collection agency that regularly reports collection rates with a statement that includes payment on accounts. A monthly statement is typical, while an online access portal is even better. 

Finding and pairing with the right collection agency can really help your company’s cash flow without damaging your image. Taking the time to evaluate several options prior to choosing a collection agency will help ensure that you have chosen a partner that will take your company’s needs in mind and provide the best results.

MCA is a third party debt collection agency that has been in constant business since 1950.  We are rated A+ with the Better Business Bureau and we pride ourselves on excellent customer service along with delivering great recovery rates.  There is no cost to you unless we collect!  Why not try and re-coop some of your past due accounts with no out of pocket expense?