Collection agencies are the type of business which collects overdue debts owed by individuals or business. They act as agents of the original creditors and contact the defaulted customers to pay their debts. So if the question in your mind is ‘How do collection agencies work?’ then check out the following sections.

What are types of collection agencies?

Collection agencies are mainly of 2 types –

In-house: In-house collection agencies are usually the billing department of large firms. In-house collection is used to collect debts while keeping the collection costs within the company.

Third-party: Third-party collection agencies are those which offer services to lending firms like credit card companies, insurance companies, financial institutions, etc. These companies either work on commission or they purchase charged-off debts from original creditors.

The Fair Debt Collections Practices Act (FDCPA), passed by the US Congress, has laid some guidelines for the collection agencies working in the US, while providing protection for the debtors. Let’s check out the dos’ and don’ts of the collection agencies.

What a collection agency can do :

They can call you at your home or at your workplace.

Contact your family members and friends and ask about your home address or your office address.

They can send you mails reminding of your debts and obligations. They’ll also suggest you ways to pay off the debts. If you don’t respond to these mails, the frequency of the letters may increase.

The collection agencies can pursue legal action if a debtor refuses to pay after being contacted.

What a collection agency cannot do:

The collection agencies cannot call you at work if you tell them not to.

The collection agencies cannot call you before 8 AM or after 9 PM of your local time.

They cannot use abusive words on calls or threaten to harm you.

Requesting post-dated checks with the intention to prosecute if they bounce.

Threatening to have you arrested if you do not pay the debt.

Suing in courts far from your place of residence.

Under the Fair Debt Collection Practices Act, you’ve the right to sue a collection agency in federal court if the agencies violate any law of the Act. If you win, you may recover damages you’ve suffered due to the violation, plus an additional amount of up to $1,000.00.