Subscribe via email

Grab our RSS Feed

Collection Agency Basics Part Two: Who They Have To Answer To

In the first article of this series I explained what a collections account was. It is a delinquent account that typically runs 90 to 120 days late. Late accounts will either be collected by the original creditor itself, or sent out to collection companies. Sending an account out to a collection company benefits the creditor because they can both write the debt off on their taxes and collect profit on the debt owed.

Sometimes old debt will be sold to a third party collection agency who becomes the new creditor. This old debt will be collected or sold to another agency until it is paid or the statute of limitations (generally seven years but it varies by state) runs out. At this point, a third party debt collection agency does not have the authority to negatively mark your credit score or take legal action against you, but they are legally able to mail letters to you and persist with the collection phone calls.

Collection agencies will obtain the following data to coordinate a game plan to collect the debt that they are trying to get: the name and address of the debtor and a record of all correspondence with them, the amount that is owed by the consumer and the date of the last payment. A collection agency has the authority to pull a credit report on a debtor and communicates with the credit bureaus often to keep information current.

All third party collection agencies answer to Federal (Fair Credit Reporting Act and the Fair Debt Collection Practices Act) and state laws that are usually extremely punitive. Third party debt collection agencies report to the Federal Trade Commission, which tracks statistics and complaints about third party collection agencies.

It is only a very rare case in which the Federal Trade Commission will get involved in a single complaint about a debt collection agency, but if the agency notices a trend that many people are complaining about the same agency it will look into it.

Rapid Recovery Solution is a commercial debt collections company that writes about medical collection agencies.

Posted by Mallory Megan on Aug 7th, 2010 and filed under Loans. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.