Practices Used by Debt Collection Agencies

by admin on November 15, 2013

Debt collectors use different practices to recover money in exchange for a fee. Some agencies also buy debt to recover the amount owed. They are prohibited from using unfair and abusive collection methods and practices.

Software and Systems

Debt collectors use specialized software, programs, and systems to monitor delinquent accounts for different types of debt, including overdrafts, consumer loans, credit cards, and secured debt. The goal is to monitor and track receivables. Managing debt recovery requires specialized tools and software to maximize effectiveness. Collection agencies also prioritize debts to make profitable decisions. They use different types of software and deceased, bankruptcy, and other data to minimize legal risk and make profits. The main goal is to monitor unpaid debt and delinquent accounts and locate hard-to-find borrowers.

What Collection Agencies Do

Basically, they place collections on the borrower’s report, send letters, and contact him by phone to attempt to recover the outstanding balance. If you don’t answer your phone and are hard to locate, the collector may contact your neighbors or friends in an attempt to find your whereabouts or to check whether they have the correct contact details. The agency may send notifications and other documents to your home address.

Collections and Your Credit Report

The credit report includes details about your loans, mortgages, credit card debts, and other accounts, along with your payment history. Most financial institutions send updates on a monthly basis. Accounts with a collection status are the ones that are sent to an agency. Banks are not required to inform borrowers that their accounts have been sent to a collector. The latter is responsible for doing this and has to notify the debtor. The problem with accounts with a collection status is that they show that borrowers are delinquent. Their credit score is seriously affected, and their application for a loan or credit card may be denied in the future. Delinquent accounts of this type remain on your report for up to 7 years. Timely payments help improve your credit score, and the impact of delinquent accounts becomes less significant with time. A prepaid credit card may save you a lot of trouble along the way.

Prohibited Practices

Collection agencies are not allowed to contact borrowers after 9 pm and before 8 am. They are prohibited from sharing your personal information and spreading malicious rumors about your financial situation or credit status. Persons who have been convicted of violations and offences that involve dishonesty, violence, extortion, and unfair practices are not allowed to work as collectors. Moreover, they cannot use threats or force in an attempt to collect the amounts owed.

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