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Collection agencies can help creditors recover unpaid debts, but they charge a fee of 15-20% of each debt collected. Harassment is illegal, and debtors can ask collection agencies to stop contacting them. However, the debt still needs to be paid off.
It’s never good to be so deep in debt that you can’t pay the bills. As embarrassing and frustrating as it is for the person responsible for paying the bills, it is just as frustrating for those trying to collect. After all, they provided a service and should be properly compensated. It’s even more frustrating if the person whose account is several months past due doesn’t try to contact their creditor and arrange a nicer set of payment terms. In this case, the creditor may feel that he has no choice but to hire a collection agency.
A collection agency is an outside organization hired to help a company collect unpaid debts. The longer a debt remains unpaid, the less chance a creditor has of recovering all the money owed. By hiring a collection agency as soon as possible, a creditor can let someone else handle the frustration of sending letters, making phone calls, and being ignored by a debtor. In fact, most people who are in debt hear the word “collections” and do whatever they can to pay the bill quickly.
Of course, collection agencies don’t work for free. The average collection agency can expect to bring in fifteen to twenty percent of each debt collected. While this may seem like an astronomical amount, most will agree that they have a better chance of recovering funds with the help of a collection agency and finding the fee that is worth it.
The reason the collection agency has gotten a bad rap is because many debtors feel they have been harassed by threatening letters and multiple phone calls from collection agency representatives. This may have been true in the past, but now there are laws to protect debtors from harassment. Although the collection agency may contact the debtor by fax, phone, mail, or telegram, they are not allowed to do so in a threatening manner. They are also not allowed to harass debtors with multiple phone calls. They should immediately identify themselves and be direct about the purpose of their phone calls.
If you are in debt and feel that a collection agency representative is harassing you, simply ask them to stop. Once a collection agency is asked to stop, they must. If they don’t stop, they can be fined. That doesn’t mean a creditor can’t sue a debtor for nonpayment of funds; it just means they have to stop calling or writing to collect those funds. You may not be getting the phone calls anymore, but until the debt is paid off, it’s still on the books.
Smart Asset.
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