The creditor may offer a flat fee to the collection agency to collect the debt on his behalf, give a certain percentage of what is collected as fee to the agency that is collecting the debt or sell the delinquent accounts to the collection agencies for few dollars.
How do collection agencies operate?
The collection agency may contact the debtor in any one of the following ways –
- By telephone
- By sending Demand letters
- Notifying the 3 credit reporting agencies Equifax, TransUnion and Experian
- Legal proceeding
The collection agency will send demand letters to the debtors. The ultimate letter is in form of a warning that may spur the debtor into action. The debtor is usually threatened that a failure to pay will compel collection agencies to report to the 3 credit bureaus
You will come across collection agencies that contact debtors over phone. By doing so, a lot of unpleasantness can be avoided and this also helps collection agencies to maintain a healthy relation with the debtors.
The last resort is a legal proceeding or litigation.
Are all collection agencies reliable?
All collection agencies are not reliable. There are many agencies that violate the FDCPA that need to be followed by a debt collector. Although from a list of collection agencies, you will not be able to identify a collection agency that may take you for a ride, you can go through reviews and rip off reports of many collection agencies for hire. So, if you find that a collection agency is violating the rules, you can report the same to the Attorney general of the state in which you are residing or lodge a complaint with the FTC or Federal Trade Commission.