What is private debt collection? Private Business Debt Collection is a process where a private debt collecting firm will step into action to collect your debt dues on your behalf. Most often they give you better results where 90% of your due amount is recovered. Private collection of debts firms serves such individuals or organizations for a fixed fee.
Debt collectors are not a very popular lot for many reasons. Understanding how they work and what their incentives are can help to make it less stressful for customers. Basically, debt collectors work for an agency, some of which are independent or for attorneys. In some cases, they act as a middleman and collect delinquent debts from those who owe it. Debts have to be at least 2 months past due – this money is collected from those who owe it and then remitted to the original creditor. Creditors pay 25 -50% of the amount collected as commission. The more a collection agency can recover, the more they earn.
Debt collectors work on getting payments on all kinds of debt – credit cards, car loans, medical debt, personal and business loans, student loans and even unpaid cell phone bills. Collection agencies specialize in specific types of debt collection. They limit work to collecting only that money which is governed by the statute of limitations. If it is difficult to collect, they try to negotiate a settlement with customers. Collection agencies also work with lawyers and file lawsuits if a customer refuses to pay.
Agencies auction off debt by packaging different accounts together – for instance, credit card debt. Buyers have the choice of picking accounts which are not very old and ones which haven’t been worked on and ones which other collectors couldn’t. These packages are bought through a bidding process. The debt type also plays a big role in the price. Mortgages are worth far more than delinquent utility bills. Collection agencies keep all the money they collect as they have bought these loans from the original creditor.
It often happens that collection of debts agencies use aggressive tactics to recover the money from delinquent accounts. If a debtor feels that the agency has behaved with him or has crossed the line for decent behaviour, he may sue the agency. Irrespective of whether the case is won or not, hiring creditors may be held responsible for the agency’s actions. It would be helpful to get a copy of the agencies insurance just in case of the unfortunate incident where the debtor takes both the creditor and the collection agency to court.