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.

What is a Debt Collector?

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.

What Do Collection Agencies Do?

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.

How is this different from a debt buyer?

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 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.

Is having debt bad for 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.

How long will negative marks remain on my credit report?

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.

If I pay off a debt, will it improve my credit score?

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.

Will settling my debt help my credit score?

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.

My account has fallen into collections, what can I do to get help?

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.  Every consumer has the right to access a free copy of their credit report at www.annualcreditreport.com.

For credit advice and answers, check out these resources from the three major credit bureaus:

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.

The Debt Collector is Calling the Wrong Person

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.

The Debt is Yours, But You Want to Stop Calls

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

Stopping the Collection Calls

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 Report a Collection Agency or Debt Collector for Harassment

If you believe that you are being harassed or treated unfairly by a debt collector, there is action you can take. The Fair Debt Collection Practices Act was put in place to protect the consumer from unlawful collection practices. Follow these instructions to help protect yourself and others from these debt collection scams.

Find out if the collection agency is in violation of the FDCPA.

There’s a lot of confusion about what is and is not legal for collection agencies. This is why it is important to be well versed in the laws surrounding the industry. Before you move forward with reporting a debt collector, you want to make sure they are in fact breaking the law. To find out more about what these laws are and what collection agencies can do, check out these articles:

Debt Collection Laws & the Statute of Limitations

The Fair Debt Collection Practices Act regulates how collection agencies may contact consumers about a debt. For example, debt collectors may only call between 8am and 9pm. This law also mandates that if you submit a formal request in writing to stop the calls, the collections agency must do so. Learn more about the laws governing collection agencies.

The Do’s and Don’ts of Debt Collection

It’s completely legal for debt collectors to contact you via phone or email, come to your door and even call you at work, in most cases. Learn more about what debt collection agencies can legally do.

How to Stop Debt Collector Harassment

Under the law, what is considered harassment and how can you stop it? Learn more about what qualifies as debt collection harassment. If you are being harassed, use the steps below to end the harassment:

  1. File a complaint with the Consumer Financial Protection Bureau. If you’ve done your research and have found the collection agency to be in violation of the FDCPA, the next step to take is to file a complaint with the Consumer Financial Protection Bureau. The CFPB is an independent government agency responsible for enforcing the laws and regulations that regulate the consumer finance industry. As their name suggests, they seek to protect the consumer from corrupt financial practices and will take your complaint straight to the company responsible.
  2. File a complaint with the Federal Trade Commission. The Federal Trade Commission is another government agency in the federal sector that enforces debt collection laws. Again, they seek to protect the consumer, but also to promote fair competition within the financial markets by ensuring that the laws are properly upheld. Not only do they enforce such regulations, but the FTC also has a hand in making the policies that govern the consumer finance market.
  3. Contact your state’s Attorney General. In addition to the FDCPA, each state may have it’s own laws about debt collection. To find out more about the laws in your state, contact your Attorney General. If you find that the debt collector in question appears to be breaking your state-specific laws, then you may file a complaint with the Attorney General as well.
  4. Finally, you can file a complaint with the Better Business Bureau. While it is not a government associated agency, the Better Business Bureau is a non-profit organization that works alongside businesses in all industries to promote ethical, trustworthy business practices. They serve as an unbiased authority on which businesses are widely respected and reach the highest standards of performance. If you are having an issue with a collection agency or debt collector, you can report the behavior to the BBB here.

Receiving Calls from Bull City Financial Solutions?

If you are receiving calls from Bull City Financial Solutions, know that we are accredited by ACA International as a Professional Practices Management Systems (PPMS) Certified accounts receivable management company.  If you believe you are being called in error or you simply want to stop the collection calls, we have created a simple online process where you can stop calls. Learn more and fill out our online form. If you are being called about a debt you recognize, use our contact form to reach out to us with any complaints or questions.

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.

What is Considered 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.

Putting an End to Harassment

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.

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