We Are A Leading Collection Company
Whether you’ve utilized a collection agency in the past or are totally new to the process, you may have some questions. Rapid Recovery Solution believes a well-informed client who understands the process is more likely to enjoy success in working with us, so we have compiled a list of frequently asked questions.
It is important to understand what collection agencies actually are. There are two main ways a collection agency may operate. The first mode of operation is generally used for debt under six months of delinquency and involves the use of contact information separate from internal collection departments. This gives the appearance of a separate credit collection agency being used, with the belief that debtors will take a separate agency more seriously.
The second and most common way involves the use of third-party collection agencies. These commercial collection companies pursue debts for the original creditors. The use of a third-party collections agency reduces stress on accounts receivable departments and helps businesses with debt collection in a way that recovers some lost funds instead of none at all. Rapid Recovery Solution is a third-party collection company, and this FAQ will contain answers pertinent to third-party collection services:
How do collection agencies make money?
Collection agencies generally take a cut of the recovered amount. This means that those hiring collection agencies don’t pay money to them directly, but rather wait for funds to be recovered and receive a portion of that amount. Rapid Recovery Solution offers a guarantee, so no payment is required unless funds are recovered. After recovery, RRS takes a percentage of the recovered amount. You can learn more about how this percentage is calculated on the “Rates” page.
There is also something known as bad debt collection. This occurs when creditors sell off old debt accounts that have little chance of recovery. Collection agencies purchase the debt so that the debtor now owes the agency the sum. The agency makes money using this method when the funds are recovered.
What methods do debt collectors use to make debtors pay?
This is a very important question, as collection agencies must operate within legal and ethical boundaries when pursuing debtors. Generally, a debt collector will take on a case and begin contacting the debtor via phone and through traditional mail. The initial letter will alert the debtor that their case has been handed over to the agency and inform them of their rights under the law. Communication will grow more persistent until the debtor is contacted and the debt paid.
For missing or difficult debtors, skip-tracing methods or the filing of legal suits may be used. Rapid Recovery Solution works with a network of attorneys and uses a four stage program to successfully recover lost funds in a majority of cases. Please see the FAQ specific to Rapid Recovery Services for additional information about how our agency handles debt collection.
What is in the letters debt collection agencies send to debtors?
A general, computer-generated letter is sent to debtors. As time passes, letters become less “friendly” and begin to describe that action will be taken through referral to credit collection bureaus or an attorney. Again, the initial communication must alert the debtor that his case has been given to a collection agency and explain his legal rights. Debtors will learn what information will be collected about them and that such information will be used for the purpose of debt collection. The letters arrive in discreet envelopes with no information identifying the contents, as is required by law.
It is important to remember that collection agencies always want to negotiate peacefully with debtors in order to reach a faster resolution. Debt collectors will always try to open communication channels with the debtor while creating a sense or urgency in order to recover funds more quickly. Communication will continue until a resolution is reached and the debt is paid.
How are phone calls conducted? Can a debtor order communications to stop?
Debt collectors who work via telephone are often assigned a variety of cases and attempt to call those debtors. This kind of work is often stressful and quickly overwhelms employees of account receivables departments who have a lot of other work to do and can’t be on the phone all day. Through compensation and motivation for excellent performance, collection agencies are able to employ debt collectors for the sole purpose of conducting telephone communications.
Much like debt collection letter delivery, telephone calls must be kept discreet unless the debtor himself is the speaker. Because of this, debt collectors can only leave generic messages on answering machines. These messages often give off a sense of urgency and provide the name and number of the debt collector, along with the importance of returning the call. The provided numbers must allow the debtor to call the agency for free. Calls between the debtor and debt collector are often scripted and include various routes the collector can take, depending on how the debtor responds.
Collectors may call the debtor’s place of employment, but they cannot tell the employer about the case or attempt to interfere with employment in a way that may get the debtor fired.
Additionally, debtors may request a stop to collection calls and letters under section 805 of the Fair Debt Collection Practices Act. The act states the following:
“(c) CEASING COMMUNICATION. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except –
(1) to advise the consumer that the debt collector’s further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification shall be complete upon receipt.”
When a debtor enforces their rights under this act, collectors generally cease collection efforts. The original creditor may still file a lawsuit or refer the case to another third-party collections agency, and the debt can still be reported to credit bureaus.
Are debt collection services actually effective? Can a debtor simply ignore communications and not pay?
Debt collection services are effective in most cases. Debt collection is the job of the debt collectors, and they do their best to resolve collection cases and receive compensation. Debt collectors are not alone, though. Cases may be referred to credit collection bureaus or attorneys for further action. Collection companies cannot seize assets or funds without a judgment awarded to them, threaten the debtor, or disclose any information about the debt to anyone aside from credit bureaus.
Debtors decide to pay for many reasons, and many choose to to avoid further intimidation and stress over the debt. Debt collection companies are very proficient at making debtors feel like the situation will escalate and get worse for them if they do not pay. Some do not understand their legal rights and many simply want to avoid damage to their credit scores and lawsuits. While cases rarely get to the point of a lawsuit, the idea is intimidating enough to make most debtors pay.
What happens when credit bureaus get involved?
Debt collection companies can report debt amounts and paid/unpaid status to one or more credit bureaus. The reported debt becomes a “Collection Account” and remains listed on credit reports with a “paid” status after the debt is paid. Collection companies may also request a debtor’s credit report. Collection Accounts remain on credit reports for seven years after original date of delinquency, as described in Section 605 of the Fair Credit Reporting Act.
Are debt collection lawsuits common?
In general, debt collection companies prefer to recover funds on their own and refer cases for legal action only as a last resort. Unless a collection agency owns the debt, they are unable to file for lawsuits on their own. The collection agency may decide to send exceedingly difficult cases back to the creditor so that the creditor may pursue legal action, but the owed amount often must be very large and the case very difficult to push an agency to do so.
Pursuing legal action is expensive and takes time. Collection agencies threaten lawsuits more often than they’ll actually initiate one. If a debtor owns a lot of assets and appears to be worth the effort of a lawsuit, it is quite possible legal action may ensue to recover larger debts. Anyone involved in a legal case concerning debt should contact a qualified attorney to discuss their options. Collection agencies often work closely with attorneys, but they cannot replace legal counsel.
Who regulates collection agencies?
There are various legal guidelines that influence the operation of debt collection agencies. The Fair Debt Collection Practices Act (FDCPA) provides regulations for third-party debt collection companies to follow. Local laws set by states and areas deal with collection efforts (telephone calls, etc.) and must also be followed by collection companies.
The FDCPA is regulated by The Federal Trade Commission. The commission oversees collection companies and may issue fines and penalties to violators, though the commission never gets involved with individual cases. If a collection company has bought a debt, they are still subject to the Fair Debt Collection Practices Act as a third-party collector.
What time limits apply to debt, and how do they change how debt collection occurs?
The seven-year time limit on credit reporting will remain based off of the original delinquency date—even if the debt is sold to a collection agency. Statute of limitations in reference to lawsuits is based on original delinquency date as well. The only way for these dates to “reset” in terms of a lawsuit is if the debtor agrees to some kind of payment arrangement. After the time limits are exhausted, collection efforts such as letters and phone calls may still continue.
Whether you’re involved with medical billing, acting as bill collector, or have other debt collection needs, an experienced debt collection agency offers the best chance at fund recovery. Recovering some is much preferable to recovering none. Contact Rapid Recovery Solution today for a free quote or to receive more answers to your important questions.