A debt collector is a company or an agency that aims to recover the money owed to someone or an organization for the delinquent accounts. A lot of companies take the services of debt collectors in exchange for some fee or a percentage of the amount recovered.
How Do Debt Collectors Work?
A person borrows money from a company or an organization. They fail to repay their loans or settle their debts. Such accounts are registered as delinquency accounts are further reported to the credit bureau. Examples of delinquent’s accounts are-
- Phone bills
- Auto loan payments
- Utility payments
- Back Taxes and many more.
In such cases, a debt collector will be asked to retrieve the payments.
Why Do Companies Hire Debt Collectors?
Companies hire debt collectors because it is cost-efficient to recover the delinquent accounts recovered by a debt collector instead of chasing the clients themselves. The debt collectors have special tools and resources needed to look for the person who owes money and the ways to get money from them. A debt collector’s tracking strategies are precise and well tested and they can be tracked even if they have changed their home or contact details. A debt collector has multiple strategies to retrieve money from the offender. They may show up at the client’s door often or contact their friends and family or neighbours to confirm the information they have. However, debt collectors cannot give them the real reason as to why they are looking for the client. Through any strategy, debt collectors make sure that the debt is paid.
Rules for Debt Collectors
Although debt collectors have their strategies there are certain rules that they must follow while collecting the money. Federal Trade Commission (FTC) monitors the debt collectors under the Fair Debt Collection Practices Act (FDCPA). A few rules under the FDCPA are as follows –
- Debt collectors shall not use any abusive or unfair practices to collect the debt from the clients.
- The client shall not be contacted before 8:00 am and after 9:00 pm.
- The debt collector shall not falsely claim that the offender will be arrested if they don’t repay the loan.
- The debt collector shall not collect the loan if the account has been declared as uncollectible.
- Debt collectors shall not start the process unless they have won a legal case against them regarding the debt.
- The debt collector should not contact the offender too many times in a short time as this will be considered as harassment. The client may issue a cease and desist letter to the debt collector and if it continues to happen, they may contact the Consumer Financial Protection Bureau (CFPB).