Collection Agencies Continued…

For example, not all collection agencies are fully licensed. This puts both the actions they take and their clients at risk. Credible collection agencies will maintain a bond for the protection of their clients – this usually averages at around $500,000, but again, the figure should be checked by prospective clients. Some collection agencies adopt a “whatever it takes” approach, which can put them at legal risk; credible agencies will have a strict code of ethics and have this code available for public viewing.

Established collection agencies will be able to give professional advice to both individuals and companies regarding how to best protect their cash flow and avoid ever having to turn to a collections agency. Naturally this will differ from situation to situation and client to client, but 5 years is generally considered to be the minimum amount of time that a collection agency needs to be in business and actively working on cases before they are “established.” Within this time, most collection agencies will have worked on a wide variety of cases and be able to provide advice for anyone owed money.

What to do when contacted by a collection agency

At one time or another, many people will receive a letter in the mail from a collection agency requesting monies due. Payment may be delinquent due to an oversight, an accounting error, or financial inability to pay. Whatever the case, the reaction is usually one of panic, although this is unwarranted. The collection agency's primary objective is to collect payment, and most are quite flexible in the terms under which payment is made as long as there are funds being collected. The recipient of a letter from a collection agency should immediately contact the agency to explain the situation; if it is simply an oversight, then payment in full should be made and no further contact is necessary once the account has been resolved. If there is a reason that payment cannot be made, this should be explained to the agency, along with a schedule of partial payments that can be made. Most agencies will accept payments made over time as long as no scheduled payments are missed or bounce.

If a consumer has a bad experience with a collection agency, they should know their rights under the law and ensure that none are being violated. For example, a debtor must always be notified before any action is taken by the agency. This requirement is usually a letter sent to the debtor's last known address. Collection agencies may be prohibited from calling on Sundays or holidays or at night. They may not give false or misleading information to either the debtor or the debtor's family, and cannot demand payment without naming the client to whom money is owed and the exact amount. Anyone with problems being harassed by collection agencies who violate these laws should contact a lawyer or credit counselor for legal advice.

By Kira Lee