What is a Collection Angeny and how do I know if I need one?

Debt collection agencies are used by creditors that needs to collect money when the they don't have the time, resources or patience to effect collections on their own. Collection agencies are experts in getting people to resolve money issues, they have trained staff that specializes in debt negotiation and skip-tracing. This training covers a broad range of FDCPA, legal and debt collecting skills as well as a proven process for going after accounts.

As a creditor, when you hire a collection agency, they are assigned the job of collecting the debt. Normally, if the agency is successful in debt collection the collection agency will retain a percentage of the amount collected as payment for services.

Typically, collection agencies do not take over the debt. The debtor does not actually owe the agency any money. It still owes to the creditor. But the collection agency will provide evidence (known as debt validation) that they have been empowered to collection the debt on behalf of the creditor.

Occasionally, collection agencies will purchase the debt from the creditor. However, usually all that the collection agencies acquire is the right to carry out the process of debt collection.

All collection agencies are governed by federal laws and no collection agency is, or wishes to be in, the business of collecting fraudulent debts. However, when acting on behalf of a legitimate creditor they will take all legal steps to enforce the collection of badly overdue accounts, if necessary going to court on behalf of the creditor.

You should use a collection agency when -

the debtor has the ability to pay but ignores you the debt is past due there is not a valid dispute

A debt collection company will approach the situation through a multi-stage letter writing campaign which can be effective, if occasionally slow, but it may not lead to recovery when -

the debtor has or thinks he or she has a valid excuse the amount past due is disputed there is an unrelated claim against you the debtor's solvency is in doubt or there is the possibility of bankruptcy there is security to recover or a possible prejudgment remedy

If any of these issues occur, the creditor should control all pertinent legal decisions such as if and when to file suit, what attorney to use and any other decisions made prior to or during the court action. This is crucial when the creditor has a long term interest in keeping the customer as his client. Not retaining control of such decisions and proceeding without the advice of a qualified legal representative could leave the creditor open to counter suit.

The option exists where the creditor does not wish to do additional business and the creditor is not interested in the outcome of a debt collection, beyond getting his money, to sell the debt to a debt purchaser.

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