The word debt often fills people with anxiety, and not without reason. The average American has over $90,000 of debt, and many struggle to manage this number. Therefore, many people find themselves encountering collection agencies at one point or another.
Unfortunately, much of what people “know” about the debt collection industry relies more on myths than facts. When people believe these myths about using a collection agency, they often run into trouble.
In this guide, we’ll debunk many of the common misconceptions people hold about debt collection. Read on to discover all you need to know about debt collection agencies.
Many people believe they can get around dealing with debt collection agencies by paying their original creditors directly. While this may seem like a reasonable assumption, it’s rarely true.
Companies hire debt collection agencies to collect debts on their behalf. Sometimes, businesses may even sell their debt to collection agencies. In that case, those businesses no longer own the debt you’re paying.
Regardless of why the debt collectors pursue the debt, the agency contacts you for a reason. You can’t bypass them, so you’ll have to work with them.
Fortunately, though, any good collection agency will make it easy for you to work with them. The majority offer many payment options, like using an online portal. They may also provide different payment plans to accommodate your financial situation.
People often think that paying towards their debt will ensure the debt doesn’t harm their credit score. In reality, and depending upon the situation, their credit score likely suffered as soon as the debt collection agency became involved.
How do you mitigate this? There are a few things you can do. First, pay your bills on time whenever possible and avoid a debt collection agency altogether. However, if an agency contacts you about outstanding debt, work with them.
Cooperate with their requests and pay your debt. If your circumstances don’t allow this, explain your situation to the agency. In many cases, they’re more understanding than people fear.
As mentioned above, many debt collection agencies offer payment plans and avenues through which to pay. If you explain your circumstances, they’ll likely find ways to work with you to resolve your debt.
The Fair Debt Collection Practices Act (FDCPA) is a law that limits a third-party debt collector’s actions and behavior when collecting debts. The act aims to prevent debt collectors from using abusive or deceptive behaviors to acquire the debt they want.
However, the FDCPA only protects consumer debtors. It offers no protection to commercial debtors such as a company. However, many states have statutes in place to oversee commercial debt collection.
If you are a company wondering who should use commercial debt (B2B) collections, try examining these points. You may find that a debt collection agency provides the solutions you need.
This myth is one of the most widespread, mainly because there’s some truth to it. Some agencies won’t bother with smaller debts, assuming that amount won’t cause much trouble. Other agencies, however, specialize in gathering smaller debts.
Why would an agency want to collect small debts? Over time collecting small debts can build into significant revenue. When that happens, a company can earn a sizable profit.
You can never assume what debts will enter a collection and which ones won’t. Assume that any outstanding debt you owe could enter a collection. Instead of worrying about it entering a collection, work to repay it as soon as possible.
If you owe a debt, it’s easy to become cynical about debt collectors. You may imagine they’re all greedy misers who want nothing more than to get rich at your expense.
In reality, debt collectors care about much more than collecting money. Their goal is to resolve your debt rather than merely collect it. That’s why they offer payment plans and recommend programs to help you escape your debt. Some companies even go the extra step to assist those in debt - check out CMC’s Recharge program to learn more.
Once again, if debt collectors contact you about the money you owe, try to work with them. See what options they provide you and what will work best with your circumstances.
On the business side of things, many companies fear that hiring debt collectors is too expensive. However, most debt collection agencies actually work on a contingency fee basis.
What does that mean? Essentially, if the agency fails to collect your money, you don’t have to pay them. This isn’t always the case, so be sure to find an agency that best fits your needs. Read more about finding the best collection agency for your business..
Since we’ve dispelled some of the myths about collection agencies, we hope you can see these collectors aren’t evil, greedy groups and offer several means to help both businesses and debtors.
If you’re a business hoping to hire a debt collection agency, consider partnering with Credit Management Company. We offer debt recovery for several industries, including healthcare, government, commercial, and more.