Posted On: October 16, 2021
The word debt often fills people with anxiety, and not without reason. The average American has over $90,000 of debt, and many struggle to manage this number. As such, many people dread their encounters with collection agencies.
Unfortunately, much of what people “know” about the debt collection industry relies more on myths than facts. Because people believe these myths about using a collection agency, they run into trouble when faced with them.
We want to help people understand the role of debt collectors in their lives. So, in this guide, we’ll debunk many of the common misconceptions people hold about debt collection. Read on to discover all you need to know about debt collection agencies.
Many people believe they can get around dealing with debt collection agencies by paying their original creditors directly. While this may seem like a reasonable assumption, it’s rarely true.
Typically, companies hire debt collection agencies to collect debts on their behalf. Alternatively, businesses may sell their debt to collection agencies. When they do so, those businesses no longer own the debt you’re paying.
Regardless of why the debt collectors pursue the debt, the agency contacts you for a reason. You can’t bypass them, so you’ll have to work with them.
Fortunately, though, many collection agencies try to make it easy for you to work with them. The majority offer many payment options, like using an online portal. They also provide different payment plan options to accommodate your financial situation.
People often think that paying towards their debt will ensure the debt doesn’t harm your credit score. In reality, your credit score likely suffered as soon as the debt collection agency became involved. If you don’t work with a collector, you’ll suffer further damage.
How do you mitigate this? There are a few things you can do. First, pay your bills on time whenever possible and avoid a debt collection agency. However, if an agency contacts you about outstanding debt, work with them.
Cooperate with their requests and pay your fee. If your circumstances don’t allow this, explain your situation to the agency. In many cases, they’re more understanding than people fear.
As mentioned above, many debt collection agencies offer payment plans and avenues through which to pay. If you explain your circumstances, they’ll likely find ways to work with you to resolve your debt.
If you ever think that you can avoid the debt collectors until they go away, you’re wrong. Avoiding collectors can only make the situation worse. It will cause severe damages to your credit score if it continues for long.
From there, the consequences get worse. The more damage your credit score gathers, the harder it will become for you to secure loans. It may also lead to reduced credit card limits.
Instead of running from the problem, find ways to work with the agency. It may be difficult up front, but over time it will prove the wiser decision.
The Fair Debt Collection Practices Act (FDCPA) is a law that limits a third-party debt collector’s actions and behavior when collecting debts. The act aims to prevent debtors from using abusive or deceptive behaviors to acquire the debt they want.
However, the FDCPA only protects consumer debtors. It offers no protection to commercial debtors such as a company. However, many states have statutes in place to oversee commercial debt collection.
If you are a company wondering “who should use Commercial Debt (B2B) collections?” try examining these points. You may find that a debt collection agency provides the solutions you need.
This myth is one of the most widespread, mainly because there’s some truth to it. Some agencies won’t bother with smaller debts, assuming that amount won’t cause much trouble. Other agencies, however, specialize in gathering smaller debts.
Why would an agency want to collect smaller debts specifically? Over time, collecting small debts can build into significant revenue. When that happens, they’ll earn a sizeable profit.
You can never assume what debts will enter a collection and which ones won’t. Assume that any outstanding debt you owe could enter a collection. Instead of worrying about it entering a collection, work to repay it as soon as possible.
If you owe a debt, it’s easy to become cynical about debt collectors. You may imagine they’re all greedy misers who want nothing more than to get rich at your expense.
In reality, debt collectors care about much more than collecting money. Their goal is to resolve your debt rather than merely collect it. That’s why they offer payment plans and recommend programs to help you escape your debt.
Once again, if debt collectors contact you about the money you owe, try to work with them. See what options they provide you and what will work best with your circumstances.
On the business side of things, many companies fear that hiring debt collectors is too expensive. However, most debt collection agencies work on a contingency fee basis.
What does that mean? Essentially, if the agency fails to collect your money, you don’t have to pay them. However, some agencies charge a flat fee.
Even if the agency charges a flat fee, it’s often affordable for businesses. Read more about finding the best collection agency for your business to meet your needs.
Since we’ve dispelled the myths about using a collection agency, we hope you can see these collectors aren’t evil, greedy groups. Instead, they offer several means to help both businesses and debtors.
If you’re a business hoping to hire a debt collection agency, consider our services! We offer debt collection for several industries, including medical debts, banking, rental, and more. We’re confident we can collect the money you need!