Collection Agency is an organization that attempts to collect money from individuals (or businesses) who have not paid their bills on time. Accounts are typically transferred to them after they have been over 60-90 days past due.
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What kind of a debt can be assigned to a debt collection agency?
1. Unpaid medical bills of a doctor or hospital.
2. Services or products which were sold but were not fully paid.
3. Mortgage debt, credit cards bill or other forms of bank delinquencies.
4. Unpaid phone bills, gym bills or other recurring membership fees.
5. Unpaid installments of car loan, student loan or bank loans.
6. Other interest and penalties.
Overall, you can initiate collection activity for almost any past due account for which you are legally entitled to get paid for and have sufficient proof to back your claim.
Example
Lets assume, you are a ‘dentist’ and your patient agreed to pay for your services in 5 installments. But the patient has stopped paying after the 2nd installment. Your gentle reminders to the patient have not resulted in any success. Would you write off the unpaid amount or would you go after the patient by trying harsher measures? It is advisable to avoid both. Taking intensive measures could even result in counterproductive action against you.
Now you approach a Collection Agency to collect your past due amount from your patient (or say Debtor). Depending on the type of service you select, a Collection agency will attempt to collect the outstanding debt and charge you a fixed fees or the percentage of debt collected. (Read: Services that Collection Agencies offer).
Should I try to collect the debt myself?
Sure, if your staff has time to do a few polite reminder calls or send bills to the debtor, and then time to do the followup for the same, try it out. But be extremely careful, respectful, polite and patient during your communication with the debtor. Most likely you will realize that too many man-hours are being spent and your staff is probably trained adequately to handle these situations.
Collection agencies are not only experts in collecting debt, the moment your debtors gets to know that a professional debt collection agency is involved, they are more inclined to pay off the outstanding debt at the earliest.
Documents to prove you legally own the debt:
There are thousands of collection agencies in United States, big and small, and each have a different way of working and the services they offer. In most cases, the collection agency will not ask you to submit all proof (or paperwork) of the outstanding debt initially, they will ask you to provide that if and when needed. For ex: If the debtor disputes the charges. A collection agency will normally start the collection activity by asking only the basic information like Debtor Name, address, phone, amount due, bill/reference number, date of debt and sometimes debtor’s SSN. At all times you should maintain sufficient proof of the outstanding debt.
Additional information:
As mentioned earlier, collection agencies are experts in collecting debt, that’s what they do all year long. They ensure that the demand notices being send out with maximum impact (collection letters , collection calls or legal notices), and that debt collection laws are followed, it includes “Fair debt collection practices act” specified by each state.
Before a collection agency signs you up as a client or starts accepting your past due accounts for collections, they will ask you to sign a legal agreement (on paper or an online contract). This agreement authorizes them to start collection activity on your behalf. Their agreement also includes important disclaimers and some standard legal stuff.
It is normally advisable to start collection activity after its been over 60 days from the date of debt, or that date when the payment was due. The sooner you submit an account for collections, the chances of recovering your money are significantly higher.
Defaulted debts are often placed on the debtor’s credit history, and usually remain for several years.
Image source:
http://www.creative-commons-images.com/clipboard/collection-agency.html
Creator attribution: Nick Youngson – link to – http://nyphotographic.com/