Collection Agency

A collection agency exists for one purpose and that is to collect debt.   Usually, when a business feels that it is unable to collect a debt for services owed it sells the debt to an agency for a fraction of the original cost.   The collection agency then tries to collect the debt, if unsuccessful they often sell the debt to a lower tier agency to recover some of their expenses on bills they are unable to get a return from.

Collection agencies have a variety of approaches they use.   From relatively straight forward contacts to less ethical methods of increasing pressure through legal means such as court orders or through aggressive and sometimes illegal harassment of the debtor.   At any time you can request that the agency no longer contact you by phone and in most places they are legally bound by this.   They may or may not honor this request, and you will need to do specific research regarding the regulations in your jurisdiction that involve credit harassment.  In some cases there are strong penalties for this type of conduct, in other places in the world you may have little or no recourse.

Ideally, you are in a position to repay a debt that you have incurred or in many cases have had levied on you, often ironically for the same reason you are unable to repay the debt.  For instance an eviction from an apartment often involves breach of contract penalties and legal fees that far exceed the amount of money that you would have paid had you stayed in the apartment.  It is an unfortunate reality of life that situations may change and catch you off guard, despite your best intentions.

In a tough economic situation, collection agencies tend to get flooded with work.  The decision to pay or not to pay may be voluntary or you may simply have no choice in the matter. 

Credit Resolution and  Payment Agreements

Generally by the time your account has gone into collections you have already taken a significant credit hit.  Credit resolution may still be worth pursuing as it may mitigate the damage to your debt report.   If you enter into a payment agreement it is important to negotiate and get in writing that your credit report will have the collection attempt removed upon payment.  

If you have no choice in the matter, you can feel like you are under siege from creditors.   There are a number of possible solutions, many of which may have long term implications.

You can elect to file bankruptcy if you are eligible.  Typically a bankruptcy discharges your debts or restructures them, depending on the type of bankruptcy you file.   A bankruptcy will follow you for several years, so this may not be an ideal solution.  If you are considering this course of action, be sure to consult with a professional such as a bankruptcy attorney who can explain the benefits and risks of this course of action.

Often payments can be restructured.   While credit agencies may play hardball, you always have the option to appear in court to negotiate a settlement plan that is affordable.  Be sure to bring your financial records and do further research on this process.   It is generally better to respond to a summons than to ignore it.

Changing Addresses

Unfortunately, many bills may arrive while you are transiting addresses.  This often happens in cases involving residential renters debt.   You may not be properly served.  Many creditors will proceed in your absence regardless and frequently obtain default judgements in their favor.  It can be a difficult process to challenge this type of situation.   Additionally many collections agency representatives have taken advantage of this process and may in fact unscrupulously proceed with an action against a party who is unaware, and in some cases even not the liable party.   Of course, if you are never served, it makes it very difficult to defend yourself against a false claim of this nature.

Collection agencies often are looking at a substantial profit and may be able to offer you a significant discount on a lump sum payment.    If you can figure out what the company is paying for the paper, you can make an offer that fits within their profit margins.   An offer in this range will frequently be accepted, particularly when the collection agent has the alternate option of taking a loss on the debt.

Debt Recovery

There are a number of collection agencies and they may be of use if you are the one seeking to recover debt.    As a resource, this page will show addresses of collection agencies.  This can be useful in making contact with a collector that may be unwilling to reveal their business number.  It may also be of great use in finding a collector that may be willing to contract with you to recover debt on your behalf.

Price of Collections

Most credit agencies charge fees that reflect the difficulty of recovering bad debt.  The older the debt the less that will be paid for it, usually from a few to several cents on the dollar is not uncommon.   Compare this to the cost of maintaining an in house debt collector and the associated expertise and it is a decision that is worth weighing carefully.   Once the debt is sold, it may in most cases be discharged and written off as a business loss.  Consult with an accountant to learn your local regulations and procedures.