How Do Debt Collection Agencies Work - Debt Collection Answers

With a background of working with a debt consolidation loan agency, I have a unique perspective on how debt collection agencies work.

For example, did you know that some creditors may use “likely to pay” data attributes from agencies like Transunion on your account to see whether you may pay?

The creditor could potentially use those sorts of attributes to decide whether to sue you in a debt collection lawsuit.

Let’s first look at the debt collection process.

Debt Collection Process

First, you need to understand that your account often does not get sent directly to a debt collection agency.

When the account goes 1 day behind, the creditor will often try to call you to get you back current. You may start with a few calls in a day, but then that will slowly get less frequent.

The original creditor may also send texts and calls to try to get you back current.

After 30 days or at any point in time, the creditor may then send or sell the debt to a debt collection agency.

1. Creditor May Sell Your Debt

If the creditor sells the debt, then the debt collection agency is the new creditor that you owe the debt to. If you attempt to validate the debt from debt collection agency, the original creditor will likely have sent the proof of debt (truth in lending disclosure) to the collection agency upon sale.

The new purchaser of the debt may assume they will get debt validation requests, which may be why individuals think debt validation companies are scams. The process is most likely automated, so it’s unlikely that the new purchaser of your debt is going to just let that piece go.

If the debt is yours, you may still responsible for the debt even if it’s sold to a debt collection agency.

2. Beware of Credit Repair Scams

When you are considering credit repair companies, consider asking what exactly the credit repair company is going to do for you. For example, if the credit repair company disputes all of the debt on your credit report regardless of whether it’s legitimate, you may want to think twice.

A creditor may remove the debt for the time being when the debt is disputed, your credit score could increase temporarily, and then you could see that debt reappear shortly thereafter.

3. You Will Get Mail

When your debt is sent or sold, you will get notification mail often within 5 days from when it was sent or sold to the agency. The mail should include the following:

The validation notice should include the amount the debt collection agency thinks you owe
The name of the creditor
How to dispute the debt in writing.

So, how do debt collection agencies get paid?

How Do Debt Collection Agencies Get Paid?

Debt collection agencies will often get paid by a percentage of what money the debt collection agency brings in. To incentivize properly, the creditor may pay a different percentage based on how long the debt has been past due. For very old debt, the debt collection agency may receive a higher percentage.

If the debt is sold to the debt collection agency, then the debt collection agency would retain the entirety of the payments received because it owns the debt.

What Are The Biggest Debt Collection Agencies?

Let’s go through some of the biggest names in the debt collection agency space in the United States. We wrote specific articles how you can deal with each of these debt collection agencies.

Debt collectors often get paid for what they bring in, but does that mean that the debt collection agency can use unnecessary techniques to recover the debt.

Absolutely not, let’s cover the debt collection agency rules next.

What Are The Rules Debt Collection Agencies Must Abide By?

The debt collection agency must abide by rules set forth by the Fair Debt Collection Practices Act (FDCPA). Here are some of the FDCPA rules.

Reach out to any other person, e.g., your family, or contacts, in an attempt to communicate with you. They can only communicate with you through your attorney or a consumer reporting agency.
Call earlier than 8:00 am or later than 9:00 pm
Use any misleading or false information regarding the debt
Add extra charges fees, interest, or any additional charges on the original outstanding debt]
Use abusive language, or harass you about the debt
Call your employer or your workplace if your employer prohibits you from such communication at the workplace

Should You Pay A Debt Collection Agency?

There’s a question why you should never pay a debt collection agency, but is that legitimate?

Not necessarily.

If the debt collection agency can validate the debt, the debt is yours, and the debt is within the debt statute of limitations, then not paying could result in a debt collection lawsuit.

That is why it’s important to do your due diligence before resolving the debt, but resolving the debt may be a very important step.