The Federal Trade Commission along with the Consumer Financial Protection Bureau claim that debt collectors accumulate the largest number of consumer complaints. Why? Typically, debt collectors are calling debtors to collect money that the debtor is unwilling or unable to pay. That being said, most businesses find it cheaper to use that collection to collect their long overdue invoices. It’s doubtful that the debt collection industry is going to fade away in the foreseeable future.
You will typically find yourself speaking with a debt collector if you owe a creditor and are late or have refused to make payment for services or goods delivered. The original creditor will turn these accounts over to a debt collection firm rather than exhaust their resources chasing difficult to collect debtors. Debt collectors typically are trained in skip tracing, professional debt collection, and often offer payment plans for those who are unable to pay the balance of a larger debt.
You are probably wondering what set of circumstances causes a creditor to turn an overdue account over to a debt collection firm. To be sure, there is no standard time span that a creditor uses when making decisions on an overdue bill. Some companies turned their unpaid invoices over to a collection agency after 90 days, while others may weigh up to 180 days before turning the account over to that collection agency. The fact of the matter is that creditors generally turn accounts over when they feel they have spent enough time trying to collect the debt unsuccessfully.
You can expect collection agencies to use a variety of methods in debt collection. They will send you letters demanding payment, report the debt to a collection Bureau which will place an entry on your credit report, and then still keep calling trying to collect the debt. When a debt collector has a difficult time locating you, don’t be surprised if they call your friends, neighbors, and acquaintances to assure they have contact information for you. This is legal; with one caveat, they are not allowed to reveal their collecting a debt and can only call a person or company one time.
You should know that debt collection accounts are one of the worst types of entries on your credit report because that account shows that you have become negligent in paying the balance of the reported debt. Guess what? That collection accounts on your credit report will significantly lower your credit score and you may be denied credit cards, personal loans, and most importantly a mortgage.
Did you know that debt collection accounts can stay on your credit report for up to seven years? Of course, you can dampen the effect of the negative credit report by paying the account. On the flip side of the argument, paying your bills in a timely and are will increase your credit score.
Debt collection is a well-established system and is in no danger of going anywhere soon. Your best bet is not to avoid a collection agency call but to address the issue directly and make arrangements to settle your account.