A debt collection agency essentially works as a company that collects money from consumers who have failed to pay their debts. Debt refers to the money borrowed to support your financial undertakings. The transaction between the creditor and the debtor is as follows:
The creditor lends money to the borrower with a fixed or floating interest.
The borrower has to repay the principal amount as well as the interest.
The creditor is on the giving end, and the borrower is on the receiving end of the process. If the debtor fails to repay the amount in the given loan repayment time, the creditor can seek the assistance of a debt collection agency.
The debt collection process
A debt collector performs the debt collection process. The collector has all the necessary information of the consumer. A debt collection process begins with the just and upright recovery of delinquent amounts and due payment. The debt collectors associated with debt collection agencies carry through the operation on behalf of the creditor.
The moneylender can either collect the amount independently or employ a debt collection agency to do the needful. In such a case, the agency acts as the third party in front of the borrower. The creditor uses the agency to represent himself to the debtor.
The agency has to deal with bad debts. Bad debt is a situation where the consumer has failed to update his loan payments to the lender. After deliberate attempts, if the creditor fails to procure payments from the debtor, the debt collection agency is taken on board. The creditor marks such profiles as written-off debts. The agency will follow through with the further procedure. The creditor hires the collection agency to avoid the damages caused to the business.
After the creditor appoints the debt collection agency, the agency initiates the procedure. An exchange of records between the creditor and the agency actuates. The next step of the process is getting in touch with the debtor. The means adopted by the agencies to collect the debt follow a non-harassment policy. The debtor is also subject to consumer rights and can willingly practice the same.
A debt collection agency also comprises legal solicitors. A legal solicitor or attorney will act on behalf of the agency. A legal representative possesses the ability to send official letters of demand and action. He can also transfer the case to the court. The legal attorney will write a letter to the debtor informing them about the commencement of the court hearings. The debt collection process furthermore has legal responsibilities. Every debt collection agency has to abide by different laws and regulations. For a legitimate debt collection process to be carried out, there are universally accepted legal methods. There are standard ethical rules which are binding for all the collection agents. The manner of the procedure determines the relationship between a debt collection agency and the consumer. Effective service and sound competency can eliminate the abusive constraints associated with debt collection.