If an individual or a business fails to pay its debts, several measures can be taken to ensure that this obligation is met. A Collection agency comes in if a person or a business defaults payment of a debt. Most of these businesses work on behalf of credits to get the debts paid and in return they are paid a certain agreed amount or a percentage of the debt collected.
These agencies can be categorized as a first party or a third party agency. The former collects debts in the initial stages of pursing the debts. This is due to the fact that there is a like hood that this agency will strive to ensure good relations with the debtor are maintained with the creditor. This is because these agencies are closed linked with the creditor if not part of them. They might be just a department or affiliated to the creditor hence ensures relations are salvaged.
The designation, first party, is derived from the close nature of the creditor to the organization. Consumers are referred to as the second party. In case this organization is unsuccessful in persuading the debtor to pay his arrears and writing the debts off is not an option, then the services of a third party are sought.
Collection agencies are third party agencies. They are given this designation since they were not part of original contract. Accounts are assigned to such this agency on the basis of a contingency fee. The gets a certain percentage of the total debts collected. This is commonly referred to as potential fee. This fee is payable upon each successful payment of debts. This means that such payment is not made after successful payment of the entire debt. This ensures that the third party gets a certain amount of money in case the creditor resolves to abandon the debt collection bid.
Typically the fee ranges between 25% and 40%. However this is pegged on the account age, type of debt and the number of attempts made to collect the debt. However it is rare for the fee to surpass 50% of the total debt.
Some agencies might offer a soft collection service that sends urgent letters to the debtor demanding that he or she pays the debt promptly else face a collection act or an undesirable credit report. If there is no response from the debtor, a hard collection would be a possible response by the agency.
Many countries have however developed legislation that limits possible harassment or any form of unfair treatment of the debtor. This might include limiting the time a telephone call can be made to the debtor, protecting the debtor from threats or any illegal steps. The agency is also barred from misleading representations or discussing terms of the debt with a third party.
In the US and the UK, there are acts that govern agency actions. All agencies must be duly registered and licensed . In certain cases, an agreement is made by the agencies and the creditor. The former purchases all debts at an agreeable value and pursues them. In case of payment, it takes the full value. Among the advantages of this, is avoiding any bad blood between debtor and creditor in case of collection actions
These agencies can be categorized as a first party or a third party agency. The former collects debts in the initial stages of pursing the debts. This is due to the fact that there is a like hood that this agency will strive to ensure good relations with the debtor are maintained with the creditor. This is because these agencies are closed linked with the creditor if not part of them. They might be just a department or affiliated to the creditor hence ensures relations are salvaged.
The designation, first party, is derived from the close nature of the creditor to the organization. Consumers are referred to as the second party. In case this organization is unsuccessful in persuading the debtor to pay his arrears and writing the debts off is not an option, then the services of a third party are sought.
Collection agencies are third party agencies. They are given this designation since they were not part of original contract. Accounts are assigned to such this agency on the basis of a contingency fee. The gets a certain percentage of the total debts collected. This is commonly referred to as potential fee. This fee is payable upon each successful payment of debts. This means that such payment is not made after successful payment of the entire debt. This ensures that the third party gets a certain amount of money in case the creditor resolves to abandon the debt collection bid.
Typically the fee ranges between 25% and 40%. However this is pegged on the account age, type of debt and the number of attempts made to collect the debt. However it is rare for the fee to surpass 50% of the total debt.
Some agencies might offer a soft collection service that sends urgent letters to the debtor demanding that he or she pays the debt promptly else face a collection act or an undesirable credit report. If there is no response from the debtor, a hard collection would be a possible response by the agency.
Many countries have however developed legislation that limits possible harassment or any form of unfair treatment of the debtor. This might include limiting the time a telephone call can be made to the debtor, protecting the debtor from threats or any illegal steps. The agency is also barred from misleading representations or discussing terms of the debt with a third party.
In the US and the UK, there are acts that govern agency actions. All agencies must be duly registered and licensed . In certain cases, an agreement is made by the agencies and the creditor. The former purchases all debts at an agreeable value and pursues them. In case of payment, it takes the full value. Among the advantages of this, is avoiding any bad blood between debtor and creditor in case of collection actions
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