Know more about Debt Collection Laws: Collections Process, Practices & Methods

When you hear the term debt collector, what kind of images come into your mind? You’re probably thinking of a person wearing a black suit, tie, shiny black shoes, with a permanent stern look on his face. You might picture someone who’s hard-hearted and would throw people out of their homes because they can’t pay their dues. This cliché portrayal of debt collectors may not be without reason. Credit collectors, however, have a right to collect money. You owe money to your creditors, and credit collectors are just trying to do their jobs by collecting pay for what you legally owe. 

So, what is Debt Collection?

Debt collection is a process of collecting payments of money owed to you by a person or a company. If you’re unable to collect payment yourself, you can go to a debt collector. A person or an organization that collects unpaid debts for other people is called a debt collector. Most debt collectors work as agents of people or businesses who loan out money to collect the debt for a percentage of the total amount received.

What is the Process of Debt Collection?

Each creditor has their own policies for sending out their accounts to collections. Before getting a loan or getting granted for a credit card, you’ll need to sign an agreement that binds you and your bank. This deal is called credit card or loan agreement, which lists the pricing information of your credit card or loan. If you review the agreement, you’ll be informed of how long a period of non-payment will occur until it’s sent to a collection agency.

Three Phases of Debt Collection Process:

1.First Six Months of Your Delinquency

The first six months of your non-payment on your credit card or loan is the time when you’ll be dealing with a first-party agency, which is your creditor’s internal collector. During this period, it would be ideal that you try to pay and settle your debt because the only people involved are you and your creditor. Plus, payment of your debt during this period would help maintain a positive relationship between you and your creditor.

2.Debt is Passed on to a Third Party

If you haven’t paid your debt after six months, your creditor will pass it on to a third-party agency. The third-party organization is a debt collector. Even if the debt collection is passed on to a third-party, the debt is still owned by your creditor. If the third party would be able to collect the payment from you, they’d earn a commission in the form of a percentage of the debt or fee.

3.Writing Off and Selling of Your Debt

If collector of debt fails to collect the payment of debt from you, your creditor writes off and sells your debt to an outside collection agency. The outside collection agency is known as a debt buyer. Once your debt is sold, the creditor’s not involved anymore. The debt buyer will collect the debt plus interest from you, to profit from buying it. 

What are The Prohibited Debt Collection Practices?

When your creditor passes on the debt to a debt collector, the collector must follow the rules of the Fair Debt Collection Practices Act (FDCPA).

Here are some things that a Debt Collector can’t do:

1.Call you at inappropriate times: collector of debt is not allowed to call you before 8 am and after 9 pm.

2.Call you at work: collector of debt is not allowed to call you at work, especially if he/she is aware your boss doesn’t let these calls.

3.Harass, oppress or abuse you: collector of debt is not allowed to call more than necessary, threat you, stalk you, etc.

4.Lie to you or imply that you’re a criminal: he/she is not allowed to conceal his/her identity when calling you, tell you that you’re a criminal, lie to you in any way, etc.

5.Disregard your written request of ceasing contact with him/her : When you’ve sent collector of debt a letter terminating your contact with him/her, he/she must respect your request.

If you have a debt, pay for it as soon as you can to avoid going through the debt collection process. If you’re facing business debt, be sure to get the help of a business law attorney who can help you decide the necessary steps to take. And if you can’t pay for your debt, and a debt collector violates your rights, contact a lawyer and ask him/her about what to do. However, if you’re unsure whether collector of debt has violated your rights, contact the Federal Trade Commission (FTC). Once you find yourself in debt, plan on how you’ll pay for it, and if you’re unable, consider getting help.


About the writer: Daniel Grate is a professional writer in the law industry. She currently writes pieces on various law topics for the common reader. In her spare time she spends quality time with her family and friends.