Once a collection agency starts contacting you regarding an unpaid debt, things can get pretty confusing very quickly. If you are in this process, it is advisable to understand how the system works. Once it reaches this status, it means that the original creditor has turned over the account to a third party agency.
There are two things that can happen when this occurs. The first is that the third party can work on commission, receiving a part of the amount that he ends up receiving. In the other scenario, they will buy the one from the original lender for around 1-5% of face value. They make their money on the difference. This is good to know and therefore a good question to ask if you find yourself dealing with an agency.
These companies are governed by the Fair Debt Collection Practices Act (FDCPA). This law protects consumers from unfair and illegal tactics. If you believe your rights under this law have been violated, you have the right to file a private lawsuit and you will want to contact an attorney who specializes in this area.
Many agents use intimidation tactics to force people to pay; however, there are quite a few things you need to be aware of that they cannot legally do. They cannot sixteen assets, bank accounts or paychecks, or make any kind of public announcements about you, beyond reporting to the credit bureaus.
They also cannot get you fired from your job or engage in physical violence. Most likely, they will also threaten legal action. Again, it is important to know if they own the debt or are simply working for the original lender. The only way they can file a lawsuit is if they are owned by you; otherwise they can only recommend a lawsuit.
Once an account is sent to collection, a letter is sent which is usually computer generated and takes on more of a reminder tone. The remaining pitch of the process will depend on your response. If you’re willing to work with them on a payment plan, for example, the tone will remain friendly. If you get defensive or evasive, the tone will become more hostile.
In the first letter, the agency must indicate that it has the right to dispute the validity of the financial responsibility. Your letter must be in writing. They will then send you a verification after speaking with the original creditor. They will also provide you with a toll-free phone number for you to call, but if they don’t hear from you, they will start trying to call you.
If they reach someone other than you, you are not allowed to talk to them about the matter. They can only leave a message and ask you to call them back. If you want the phone calls to stop, you can write a cease and desist letter asking them to stop contacting you. At that point, the account can be returned to the lender, sent to another agency, or simply cancelled. However, the offices will still be reported and you will remain financially responsible. It doesn’t just go away.
