If you’ve ever experienced difficulties in obtaining money owed to you, you may have been advised to consider using the services of a debt collection agency. But what does this type of agency actually do?
Collect Debts
As the name suggests, debt collection agencies specialise in collecting debts. There are 2 main ways in which they do so:
Buy Your Debt
In certain cases, you can simply sell, or “assign,” your debt to a debt collection agency for a lower amount than the debt is worth. You receive a fast resolution to the problem, and the agency profits by collecting the full amount from the debtor.
Collect Your Debt for You
In other situations, a debt collection agency takes responsibility for collecting a debt on your behalf. You still have ownership of the debt, and receive all money recovered from the debtor in full. In return for this service, the agency typically charges a percentage of the total money collected.
How Does a Debt Collection Agency Collect Debt?
Debt collection can be a complex, time-consuming process involving discussion, compromise and even legal action. Debt collection agencies offer a specialised, professional service which aims to help debtors in their efforts to repay. There are many rules governing how to do this, but these are the basic steps:
- Inform Debtors of Their Obligations
Debt collection agencies make sure debtors are fully aware of the debts they owe and their legal obligations regarding repayment. This can be done via letters, emails, phone calls or even visits to a debtor’s home.
- Open a Dialogue with Debtors
If a debtor has defaulted on a payment, it is often because they are experiencing financial difficulties. In such circumstances, debt collection agencies may negotiate a new schedule for repayment which is suitable for all parties. And with so much experience in dealing with this type of situation, debt collection agencies are also able to provide debtors with sound advice as to how to improve their financial situation, increasing the likelihood of prompt repayment of the debt.
- Instigate Legal Proceedings
When a debtor has the means the pay, but refuses to do so, debt collection agencies will turn to the courts to seek a legal remedy. A debtor may then receive a court order demanding the repayment of the debt, and face severe consequences if they fail to comply.
How Successful Are Debt Collection Agencies?
Debt collection agencies consist of experienced professionals who specialise in the recovery of debt and are extremely successful in doing so. Of course, there are certain situations where this is impossible, such as when a debtor goes bankrupt. But generally speaking, debt collection agencies represent the most effective option for debt recovery.
If you are having trouble collecting a debt, debt collection agencies provide a valuable service. They take control of what can be a time-consuming, tedious process, and increase the likelihood of repayment. In other words, for a small fee, you receive the money you’re owed without the hassle of chasing up debtors.