Collection Agencies: What are They and How Do They Work?

Small businesses and other organizations used third party collection agencies to collect money that is owed to them. The time, energy and human resources necessary to collect overdue account balances distract their workforces from concentrating on core business responsibilities. Of course, collection agencies do not work for free; they charge a percentage of the monies that they successfully collect (normally between 20 and 35 percent). For the businesses that utilize their services, it is believed that paying the collection agency to retrieve overdue funds and paying them a percentage is better than collecting nothing at all.

Debt collectors that are employed by these collection agencies have notoriously bad reputations for being overly aggressive and/or disrespectful to the debtors that they attempt to collect from. As a debtor, you are entitled to fair treatment as outlined in the Fair Debt Collection Practices Act (FDCPA). Debt collectors are regulated as to the methods that they may employ to attempt to collect from a given debtor. Here is a partial list of those regulations:

A debt collector may not:

• call you before 8 am;
• call you after 9 pm;
• call you at your place of employment;
• engage in abusive or deceptive strategies to collect a debt;
• engage in repetitive phone harassment;
• misrepresent their identities;
• falsify credit information about debtors;
• send false documentation to you that appears to be from a court;
• imply that you are guilty of a crime and stand to be arrested;
• collect any amount past what is actually owed;
• claim that legal action is to be taken concerning the debt when it fact it is not;
• fail to inform you that legal action is being taken against you.

If you write a letter to the collection agency that is contacting you stating that you wish for them to cease, they are required to do so. This does not alleviate you from the debt; it simply means that the collection agency must desist from their collection attempts. Likewise, you are fully entitled to dispute any debt that you are being perused for.

If you are going to engage in conversations with representatives from collection agencies, there are some guidelines to keep in mind. Here they are:

• Remember that you are fully entitled to be treated fairly and with dignified respect. Just because you owe a debt doesn't give a debt collector the right to be demeaning to you. Do not hesitate to assert this fact to them.

• Do not offer information that’s not directly relevant to the debt being discussed. Stick to the facts and do not allow yourself to be disarmed by the collection agency representative.

• Remember that a debt collector works for a percentage. They are trying to get you to cough up as much money as possible with no regards to your other responsibilities. They have the power to negotiate or they wouldn't even be calling you. Ask yourself what would truly be a comfortable periodic payment amount, and then offer the half of that.

• Do not discuss your employment, family, banking information or any other aspect of your life besides the debt in question.

• If you strike a "deal" with a debt collector, let them know that you will not honor it until you receive it writing.

Dealing with collection agencies is unpleasant by nature. However, if you find yourself in the position that you must, there are ways to make it a beneficial situation. Always arm yourself with knowledge and forethought before engaging in deliberations with a debt collection agency.