CandleFocus Glossary Editor
A collection agency is a business entity tasked with the job of recovering past due funds or funds from accounts in default. Collection agencies work with both credit bureaus and lenders to try to retrieve unpaid funds. Collection agencies are regulated under the Fair Debt Collection Practices Act (FDCPA) and are bound by certain rules and regulations when it comes to collecting funds.
The FDCPA is a federal law that was put in place to protect consumers from abusive and unfair practices that some collection agencies may use in an effort to collect funds. Under the FDCPA, collection agencies are prohibited from using false or deceptive means to collect from individuals, such as making threats of violence or using intimidating language, as well as from disclosing personal information about debtors. They are also required to send written notice to the debtor within five days of making their first contact, outlining the original creditor and the amount owed.
It is important to remember that collection agencies are not immediately granted permission to access an individual’s personal financial information, as they must first obtain permission from the individual or a court. Collection agencies will generally attempt to contact an individual by phone, mail, email or text in an effort to secure repayment, if the individual does not respond, they may take legal action or sue.
When debt is sold to a collection agency, the original terms and conditions of the loan usually stay the same. However, it is up to the agency to work out a plan with the debtor that is both acceptable to the lender and beneficial to the debtor. There are a variety of repayment options available to individuals, such as lump-sum payments, installment agreements, financial hardship plans and flexible repayment plans.
The goal of a collection agency is to collect as much of the debt as possible and to do so in a manner which is legal, ethical and respectful of the individual. It is in the best interests of both the collection agency and the debtor to work together to find a mutually beneficial agreement that can help the debtor pay back the debt and the collection agency get their commission for the job. If both parties work together to find a solution that is in their best interest, then both can benefit from a successful debt collection experience.
The FDCPA is a federal law that was put in place to protect consumers from abusive and unfair practices that some collection agencies may use in an effort to collect funds. Under the FDCPA, collection agencies are prohibited from using false or deceptive means to collect from individuals, such as making threats of violence or using intimidating language, as well as from disclosing personal information about debtors. They are also required to send written notice to the debtor within five days of making their first contact, outlining the original creditor and the amount owed.
It is important to remember that collection agencies are not immediately granted permission to access an individual’s personal financial information, as they must first obtain permission from the individual or a court. Collection agencies will generally attempt to contact an individual by phone, mail, email or text in an effort to secure repayment, if the individual does not respond, they may take legal action or sue.
When debt is sold to a collection agency, the original terms and conditions of the loan usually stay the same. However, it is up to the agency to work out a plan with the debtor that is both acceptable to the lender and beneficial to the debtor. There are a variety of repayment options available to individuals, such as lump-sum payments, installment agreements, financial hardship plans and flexible repayment plans.
The goal of a collection agency is to collect as much of the debt as possible and to do so in a manner which is legal, ethical and respectful of the individual. It is in the best interests of both the collection agency and the debtor to work together to find a mutually beneficial agreement that can help the debtor pay back the debt and the collection agency get their commission for the job. If both parties work together to find a solution that is in their best interest, then both can benefit from a successful debt collection experience.