Debt Collector

A debt collector is a company or agency that is in the business of recovering money owed on delinquent accounts. Many debt collectors are hired by companies to which money is owed by debtors, operating for a fee or for a percentage of the total amount collected. Some debt collectors are debt buyers; these companies purchase debt at a fraction of its face value and then attempt to recover the full amount of the debt.

A borrower who is unable to settle his debts or fails to make the scheduled payments on a loan will have his delinquency reported to the credit bureau. Not only will his credit history be hit, but his debt will be turned over to a collections agency or debt collector within three to six months of default. Overdue payments on credit card balances, phone bills, auto loan payments, utility payments, and back taxes are examples of delinquent bills that a debt collector may be tasked with retrieving.

Companies find it cheaper to get a debt collector to recover unpaid debts than chasing the clients themselves. The collector has the tools and resources needed to track down a debtor, whether s/he has changed location or phone number. These agents also carry out multiple strategies such as calling the debtor’s personal phone and work phone, and even showing up on the individual’s door front every now and again in a bid to get the debtor to pay up his or her balance. Collection agents could also contact family, friends, and neighbors of the borrower in order to confirm the contact information that they have on file for the individual, but they cannot disclose the reason for trying to reach the person. An agent may choose to mail late payment notices to the debtor also. Either way, debt collectors ensure that the debtor has their full attention.

If the individual budges and pays his debt, the creditor pays the collector a percentage of the funds or assets that the agency recovers. Depending on the contract agreement entered into with the original creditor, the debtor may have to pay the full debt at once or only a portion of the debt at a time. However, if the borrower still would not cover his overdue account, the collector can update the borrower’s credit report with a ‘collection’ status. Having this status on a credit report is sure to decrease the individual’s credit score. A low credit score will affect his or her chances of obtaining a loan in the long term, especially since an account under debt collection can remain on a credit report for seven years.

Debt collectors are monitored by the Federal Trade Commission (FTC), which enforces the Fair Debt Collection Practices Act (FDCPA). The FDCPA prohibits debt collectors from using abusive, unfair or deceptive practices during the debt collection process. For instance, debt collectors are not allowed to contact debtors before 8:00 AM or after 9:00 PM, nor can they falsely claim that a debtor will be arrested if he or she does not pay. A debt collector would be found in violation of the FDCPA if s/he proceeds to collect old debt that has been charged off as uncollectible. An account that is uncollectible is one that has no chance of being paid off due to the fact that the borrower filed for bankruptcy or cannot be located. Furthermore, unless a debt agent has won a lawsuit against a debtor, it can't legally seize assets from a debtor or physically harm or threaten a debtor to make payment.

Finally, an individual has the right to issue a cease and desist letter to a debt collector who repeatedly contacts him or her within a short period of time, as the FDCPA regards this behavior as a form of harassment. If after receiving the cease and desist, the collections agency still continues harassing the individual, s/he can make a report to the Consumer Financial Protection Bureau (CFPB).