A collection agency is nothing but a company hired by the creditors to recover funds for them which are due. In many cases, the lenders have their own division or subsidiary which acts as the collection agency. Once the lenders fail to collect the amount that they owe to individuals or business entities even after making repeated efforts, then they take the help of a collection agency. A percentage of the amount recovered for the lender goes as the profit of the collection agency. Some aggressive collection agency purchases the debts from the creditors at a discount and it thereafter tries to collect the entire outstanding debt from the debtor. The difference between the amount that the collection agency has been able to recover from the debtor and the amount that is has paid to the lender while purchasing the debt, is the profit of the collection agency.
However, in order to recover the debts from the individuals and business entities, the collection agencies can not resort to unfair practices. In fact the Fair Debt Collection Practices Act (FDCPA) has stipulated the code of conduct for the debt collectors. The main purposes of this act are to eliminate abusive practices in the collection of consumer and business debts and to promote fair debt collection practice. The act also aims to provide the consumers with an avenue for disputing and to challenge in case there is information inaccuracy. So the FDCPA tries to protect the honest and rightful consumers from any kind of malpractices meted by the debt collectors. By this act, unless and until a collection agency wins a lawsuit against a debtor, it can not legally seize the assets of a debtor. A collection agency legally can’t threaten, physically assault a debtor to make payment. A collection agency is legally bound to follow certain best practices while attempting to collect the debts of the debts. Two best practices are listed below.
- Do not make harassing calls
Collection calls are intended to inform the debtors about their obligations and the aim is to motivate the debtors to repay the debts. The calls however should not cost the debtor toll charges. Calls can’t be made any time before 8 am and after 9 pm in local standard time. During the initial calls the aim should be to establish rapport with the debtor and then gradually to offer solutions to them.
- Notify the consumer about their rights to dispute
Within one month of the initial communication with the consumer, a notice should be sent to the consumer that they have the rights to dispute.
If the debt collectors are strictly follow the best practices, they can amicably recover substantial amount of debt owed by the debtors.
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