The Basics Of Debt Collection Agencies

If you have a debt that you have not paid back, it's possible that a debt collection agency will come after you to collect the money that is owed. Here is what you need to know about how debt collection agencies actually work so that you can be well prepared. 

The Original Creditor Tries To Collect The Debt

Know that unpaid debt isn't going to go straight to a debt collection agency if you do not pay it. The original creditor will attempt to collect it from you for several months using various methods. They may call your phone, send you an email, send a letter in the mail, or even use text messages. They are going to try whatever they can to get you to pay back as much of the debt as you can. They may even attempt to settle the debt with you, by agreeing to a partial payment that will wipe out the entire debt.

A Debt Collection Agency May Be Outsourced To Assist

The original creditor may start to enlist the help of a debt collection agency to get back the money that you owe. They can do this in several ways, but they may be hired to simply contact you on behalf of the original creditor. The debt collection agency may not be the actual company that you owe money to, but they are allowed to contact you on their behalf and say they are the original creditor. 

When a debt collection agency is outsourced to call on the original creditor's behalf, this is typically done on a contingency basis. This means that the debt collection agency is not paid until the debt is collected, and then they are paid a commission in exchange for collecting the debt. 

 A Debt Collection Agency May Buy The Debt

There is also an option for the original creditor to sell the debt to a debt collection agency. This gets the debt off the original creditor's financial records and considers it a closed matter. This works by having the debt collection agency pay the original creditor a small percentage of what the debt is worth so that they own it. The debt collection agency is then allowed to contact you to collect the debt that they now own.

The amount paid to buy the debt from the original creditor is going to be less than if they were outsourced and paid a commission. However, the debt collection agency can keep the debt that they collect from you. 

For more information, contact a company like YCCS - A National Collection System.

About Me

Keeping Your Financial Wits About You

A few months ago, I realized that maintaining a healthy financial situation was about more than simply making a budget and sticking to it. It was also about being able to stay calm and think rationally when you came across something you really wanted to buy, also known as impulse buys, if you will. I started focusing on identifying and avoiding impulse buys, and it made a huge difference in my personal and financial life. I was able to think more rationally about what I wanted and why, and I was really pleased with how much easier it made my finances. This blog is all about keeping your financial wits about you.