How Do Collection Agencies Work?

When asked about “what collection agencies do?” most people think of the debt collector that has been trying to contact them about some unresolved debt. What people don’t realize is that there are two, very distinct, business models in the collections industry which go about collecting delinquent accounts in different ways.

How Do Collection Agencies Work

In short, a debt collector is simply a person trying to collect an outstanding balance. In most cases they work for a third part collection agency, however, they can be from the original creditor as well. The Fair Debt Collection Practices Act (FDCPA) currently only covers third party collection agencies.

Essentially, collection agencies offer a service to businesses that allow creditors to outsource collections to a third party. When accounts become delinquent (in many cases 60 or more days late) creditors may contract with a collection agency to pursue payment. What’s important to note in this scenario is that the collection agencies do not own the debt. The amount owed by the consumer is still owned and controlled by the original creditor. In this situation, the collection agency works as a middleman between the consumer and the creditor in exchange for a percentage of the amount collected. A large majority of collection agencies operate this way, meaning that they are compensated only when they are able to successfully collect on an account.

When the original creditor decides they no longer want to own the account they sell the debt. In this scenario, the creditor will put together a “package” of delinquent accounts and sell it to a “debt buyer”. The advantage of purchasing these hard-to-collect debts for the buyer is that they have claim to all the money they can recover and are no longer required to involve the creditor in what settlement to offer. After obtaining ownership of the debt, the debt buyer may try to collect on the account themselves or they might hire a collection agency on commission to complete the work as described above.

How Do Debt Collectors Find You?

It’s hard to hide from a debt collector. Some people think you can “lay low” and wait out the collection attempts, but in our digital age it is easy for anyone (including collection agencies) to find out the information they need to get in touch with you. With nothing more than a name, collectors can use public records and other resources to find information such as phone numbers, current and past addresses, and family contacts. Listed below are a few of the ways they can track down this information.

How Do Debt Collectors Find You

When trying to find a way to get in touch with you, this is where the collection agency starts. If you think about it, when you sign up for a credit card, loan, utilities or any other type of service, the company usually takes down your name and other information such as your phone number and address. If the information provided is current and valid, it makes the collector’s job much simpler. When it is not, however, they must use other means to find you.

Collectors trying to recover a debt may pull a credit report to find out more information about you and your payment history. Typically, they use this method sparingly because it comes at a cost. They also tend to be wary about adding an inquiry to your record as it may negatively impact your credit score.

Whenever you sign up for something, fill out a survey or enter personal information online there is a possibility that this information is being collected by a data aggregators. These agencies gather purchase history and demographic information from consumers in order to sell it to interested parties. There is usually an option to “opt out” of these kinds of services, so pay close attention when providing your personal information online.

From the Department of Motor Vehicles and postal service to your voter’s registration, collection agencies can sometimes gain access to the information you provide to government organizations in order to collect and verify your current contact information.

With most public record information now online, it’s easier than ever for debt collectors to find your current address and phone number. Whether it be through the phonebook or your local county records office, the information they need is just a few clicks of the mouse away.

As a last resort, a collection agency may hire a skip tracer to locate a consumer. Skip tracers are a special type of investigator that use both traditional and technologically advanced search methods in order to locate someone. Their name is a reference to the term “skip town” as they are usually searching for people who have left their local area in order to avoid something (such as making a payment).

As one can see, it can be fairly difficult to run from a collection agency. Instead of trying to hide from your debt, a better course of action to take is to contact your collector directly to see how they can help you. Many times they are willing to work within your means to develop a payment plan and help you get out of debt. For advice and information on how to deal with your collectors, check out this article.

How Does Debt Affect My Credit Score?

There are many myths about debt and how it affects a person’s credit. The Consumer Financial Protection Bureau has detailed information on their website. Check them out here. We’ve answered some of the most common questions on this subject below.

How Does Debt Affect My Credit Score?

Not all debt is bad. If you keep your credit card balances low and make all your payments on time, you’ll be on your way to having a strong and healthy credit score. The flip side to this scenario is having lots of debt that you can’t afford to pay back and having your accounts fall into collections. When this happens, the negative marks that show up on your credit report can severely damage your score.

Negative marks such as missed payments or an account that has fallen into collections can remain on your credit report for around 7 years. More serious delinquencies such as bankruptcy and unpaid tax liens may stay on your report for as long as 10 years.

Paying off a debt that is in collections may not immediately improve your score. As noted above, collection accounts typically remain on a credit report for seven years before being removed. The negative effects may lessen over time however. While it may not immediately affect your credit score, it will likely show up with an annotation that the debt was “paid in full” allowing future lenders to have more confidence in your ability to pay back what you owe.

Many think closing an account, no matter how it is done, will show up as a positive on their credit report. In reality, settling a debt won’t do much for your credit score and may even cause it to drop a few points. If you think about it, a settlement is agreeing to pay less than you owe. While this may be the only option for some people to make their way out of debt; it makes you a higher risk to future lenders because according to your credit history, there is a possibility they won’t get paid back in full.

While you cannot erase the mark on your credit, you can start working to improve your score. There are several financial management and credit counseling services out there that can help you develop a plan to get out of debt and learn how to manage your money effectively. You can also work with your creditors to create a payment plan that fits into your budget. Paying off the money you owe and taking measures to make sure you do not fall into this situation again is the best thing you can do to improve your credit score.

How to Stop Collection Calls

Receiving numerous calls from a collection agency can be overwhelming and frustrating. While it can be tempting to just ignore the calls so that you don’t have to deal with the collector, this can cause bigger problems for you down the road. The good news is that there are simple and effective things you can do to get a collection agency to stop contacting you. Whether you are receiving calls in error for a debt you do not owe or would simply rather resolve your debt issues in another fashion, every consumer has the right to stop collection calls.

How to Stop Collection Calls

If you believe that the debt in question is not yours, in most cases you simply need to notify the collection agency. The debt collectors are just trying to do their job, and continuing to call a person that is not linked to the debt they are trying to collect will benefit no one. Sometimes this can be done over the phone, but if you are greeted by an automatic menu system it can be difficult to get in touch with the right person. The Consumer Finance Protection Bureau recommends that you write a letter to the agency explaining the error and provide any evidence you have that the debt is not yours. Using this method will give you a dated record of the request, should any problems arise in the future.

Remember, whether you own the debt or not, your rights against harassment are still protected in the FDCPA.

It is your right, as outlined in the FDCPA, to choose how a collection agency contacts you. Whether you prefer be contacted by phone, written communication, or both, collectors must comply with your request. As mentioned above, the easiest way to do this is to ask the agency to stop calling you next time they attempt to get in touch. Sometimes collectors will even offer an online form to help expedite the process. If you still receive calls after requesting for them to stop, it may be necessary to send a formal cease and desist letter. Once received, the collection agency should only contact you to:

  1. Notify you that the collection calls will end
  2. Advise you that other means to collect your debt may be used

As a third party collection agency that operates in accordance with the FDCPA, the Help Desk Representatives at Bull City Financial Solutions will respect your request to stop calling. If you have received calls from any of our 800-numbers including 800-489-7999 and would like them to stop, please use our simple online contact form to ask that your number be added to our Do Not Call List. Once the request is received, calls should stop within 48 hours. If you experience any difficulty stopping calls to your number, please contact us directly at 1-800-489-7999. We are available to assist you any time Monday-Friday from 8am-9pm Eastern Time. For more information about stopping calls from Bull City Financial Solutions, please watch our video below.

How to Stop Debt Collector Harassment

If you owe money to a creditor and are behind on your payments, it is likely that a debt collector will be contacting you. While it is perfectly legal for third-party collection agencies like Bull City Financial Solutions to attempt to contact you in regards to your debt, there are laws in place meant to protect consumers from harassment.

How to Stop Debt Collector Harassment

The Fair Debt Collection Practices Act (FDCPA) outlines a set of regulations that debt collection agencies should follow in order to prevent harassment. Under this act, there are several restrictions for how and when these agencies should contact you including:

  • Not contacting you before 8 a.m. or after 9 p.m.
  • Not contacting you at work if you have requested this in writing.
  • Not harassing the debtor in any form including threats of harm, using obscene language, or repeated contact by phone in an effort to annoy the debtor.
  • Not making false statements or misleading the debtor about their identity or the debt.

Debt collectors should always notify you of their identity when you receive a call, and they are required to provide you with verification of the debt if requested. If you would like to find out more about the regulations outlined in the FDCPA, visit the Consumer Financial Protection Bureau’s website.

If you believe you have experienced a violation of any of the regulations listed above, there a few steps you can take to end harassment from a debt collector. First, you should contact the collection agency directly and ask them to stop contacting you. At Convergent Outsourcing, we try to make this process as easy as possible by providing an online contact form with which you can make a complaint or request to be added to our Do Not Call list.

If contacting the agency directly did not provide any results, your next step is to file a complaint with the Better Business Bureau, your state’s Attorney General or the Consumer Financial Protection Bureau. The last two are government organizations that can enforce the laws outlined in the FDCPA and will assist you in dealing with debt collectors that have stepped out of line.

Finally, in extreme cases there is the option to take legal action, but this should be a last resort. Dealing with any kind of lawsuit is time consuming, stressful, complicated and may end up costing you money.