If you’re a business owner in a field that deals with debt collection often, it’s important to know what a debt collection agency does and the laws that govern debt collection.
What does a debt collection agency do?
A debt collection agency is a company that regularly collects debts owed to others. A vast majority of the collection agencies in the United States work on a contingency, third party basis. This means that they collect on accounts that are owned by other companies. Businesses that commonly use debt collection agencies are doctors, hospitals, government, auto lenders, utilities and small businesses. Most collection agencies collect debt for a fee or percentage of the total amount owed, but some agencies have their own fee structure.
Debt collection agencies vs. debt buyers
Many people confuse debt collection agencies and debt buyers. Debt collection agencies are B2B service businesses. Collection agencies get paid after the work on an order is completed. Debt buyers, on the other hand, buy debt. Debt buyers are financial firms, and their financial practices are similar to large consumer banks. Although debt collection agencies and debt buyers are different, they’re often linked. However, even though they both work on returning debt to businesses, they go about it in a completely different way.
Governing laws for debt collection agencies
Many people associate debt collection agencies with harassment. However, in the state of Florida, for example, it’s illegal for debt collection agencies to contact you with such frequency that it could be considered harassment. In addition, debt collection agencies may not harass or abuse anyone while trying to collect the debt. For example, a debt collector may not threaten someone, use profane language, advertise the debt or continuously make phone calls with the intent to harass the person being called.
A debt collector may contact you in person or by email, mail, telephone or fax. However, debt collectors may not contact you at work if they know your employer doesn’t approve. Additionally, they may not contact you at unreasonable times, such as before 8 a.m. or after 9 p.m. unless you agree that it’s okay. Debt collectors are required to send you a written notice within five days after you are first contacted telling you the amount of money that you owe. They are also required to specify the name of the creditor that you owe money to and what will you need to do if you believe you don’t owe this creditor money.
Reputable debt collection agencies are aware of all of these laws and are diligent in making sure that they comply with all governing rules and regulations. If your business is looking for a debt collection agency, make sure you do your research and hire someone with a good reputation and one that follows all of the laws. The last thing you want is a customer being harassed by the debt collection agency you hire.