Debt collectors are heroes or villains, depending on your point of view. If you own a business and have money in debt, hiring a debt collector can help you get it back. If you are the person who owes money, you may want to avoid confrontation with a debt collector.
However, whatever your feelings about debt collectors, often also called banknote collectors, the good ones are simply doing their job. Here’s what a debt collector is and what they do.
What is debt collection?
Debt collection is an industry that exists to help businesses, large and small, get their money. Debt collectors work for debt collection agencies, with a mission to get people to pay what they owe. It can be a stressful and rewarding job all at once. Debt collectors meet many people who often want to pay their bills but can’t afford it; at the same time, debt collectors are helping businesses, many who cannot afford to slip unpaid bills.
There are many reasons why someone ends up owing money to a company. According to the Consumer Financial Protection Bureau, $ 88 billion in medical bills are currently with debt collection agencies, affecting 1 in 5 Americans.
The job of a banknote collector is to try to help the person pay what he owes, which should help improve the debtor’s credit score and also help the business owner.
If you work as a debt collector, you will likely find yourself in a call center at a debt collection agency, rather than the original creditor’s office. While it may seem like a stressful job, it is said to be a profession with medium job stress. There are also many benefits, especially if it is a full time job with benefits. The barriers to getting the job tend to be low – you will need a high school diploma – although you may need more education if you want a higher paying position. Many debt collectors report having a healthy work-life balance.
How debt collection agencies work
Debt collection agencies have one main mission: to get someone to pay back the money they owed on a debt. Often, if the debt is considerable, it is done by preparing installment plans. Generally, debt collectors will contact debtors by telephone or post. A new rule from the Consumer Financial Protection Bureau, which went into effect on November 30, 2021, states that debt collectors can contact debtors via email, SMS and social media. If a debt collector gets in touch with social media, it should be via a private message and not, say, on a Facebook thread that everyone can see. There should also be a way for the social media user to opt out of communication through that platform.
There are two main types of debt collection agencies: first-party creditors and third-party creditors.
A first-party creditor is not a debt collection agency as much as the debt collection wing, or a subsidiary or affiliate, of a company. If you’ve had someone from your credit card, auto loan lender, or financial institution to get you a loan, you’ve worked with a first-party lender.
Third party creditors are debt collection agencies or debt buyers. These debt collection agencies are often hired by first-party creditors, often after 30 days of a bill’s due date and once the first-party creditor feels there is no need to spend much more time and effort to collect a debt.
Often, the third party creditor acquires the right to attempt to collect the invoice within 30 days or six months, and possibly longer, such as a year or two or more.
These collection agencies are expected to collect debt responsibly. For example, they can’t belittle or harass you. They can’t send someone to your house to ask for money. They shouldn’t call more than seven times in any seven day period, and if you are talking to a debt collector, they should wait seven days before calling you again. They shouldn’t even call you at work, either before 8am or after 9pm
But some debt collection agencies overstep their boundaries by ignoring these rules. In 2021, the Federal Trade Commission issued more than $ 4.86 million in refunds to consumers harmed by illegal debt collection practices.
However, there are many debt collection agencies that are reputable and provide much needed service. If you are a small business owner who simply cannot afford to be robbed of money, a debt collection agency can be a lifesaver.
As for how they make money, debt collection agencies sometimes work on commission – they’ll get a portion of the debt repaid to the company. And sometimes the debt collection agency, or the debt buyer, buys the debt. According to the Minnesota Attorney General’s website, “It is not uncommon for a debt buyer to pay less than five cents per dollar owed.”
So a debt buyer could purchase $ 1,000 debt for $ 50 or less. If the debt buyer can persuade the person who owes money to pay $ 1,000, that is a profit of $ 950. If the debt buyer can at least persuade the indebted consumer to pay, say, $ 300, it is still a profit of $ 250.
What to do if a debt collector contacts you
The only thing you should do is stop for a while. Not that you don’t have to pay off a debt you owe, but you need to gather some information first.
For starters, it may not be a real debt collector you are talking to.
“One of the biggest problems with paying off debt, especially student debt, is the constant problem of fake phone calls from debt collectors and those offering debt relief. Knowing exactly who to trust in this environment can be tricky, ”says Melanie Hanson, senior editor at EducationData.org, which provides data on the US education system.
“As a good rule of thumb, never trust a phone call on its merits,” advises Hanson
He suggests confirming everything you hear on the phone about your student debt by checking the debt collector on the Internet and, ideally, checking your loan accounts directly with your lenders.
“False collectors and bogus relief programs thrive on obtaining personal information from gullible debtors who think they are talking to someone official,” says Hanson.
Ashley Morgan, a bankruptcy attorney who owns Ashley F. Morgan Law in Herndon, Virginia, agrees that you don’t want to hastily agree to pay off a debt, even if you’re pretty sure you owe the money.
“If a debt collector contacts you, it’s important to check the debt,” Morgan says.
He also advises not to admit on the phone that you owe money. After all, maybe you don’t, and this isn’t the time to give a debt collector the ammunition they can use against you later on. Instead, Morgan says, “You should request that they send you written correspondence about the debt they believe you owe them.”
Once you have this information, if you have any questions about debt, you should submit a request for information in writing, Morgan says.
“The information requested is important to help you understand whether or not the debt is actually owed and whether the debt collector has the capacity to collect the debt,” says Morgan. He points out that the debt could fall within the statute of limitations. After three or six years, and maybe even more – depending on state law – debts are often not collected. As in, no one can sue you for debt.
In fact, you may want to be careful about making a partial payment on extremely old debt. In some states, if you do, the time frame will pick up and suddenly the statue of limitations may not run out for many more years.
It also helps you learn everything you can about the consequences of not paying a debt, such as seeing your credit score go down. Remember that you can negotiate with debt collectors and get them to agree to allow you to pay less than you owe. Know your rights with a debt collector, so you can find out if you should report them to the Federal Trade Commission or the Consumer Financial Protection Bureau. Some of the tactics that debt collectors are not allowed to do include:
- I’ll call you before 8am or after 9pm
- Calling you repeatedly.
- Post any social media message about your debt.
- Use obscene language or swear words while talking to you.
- Making threats.
- Publication of lists of people who refuse to pay their debts. (They may, however, report information to a credit reporting company.)
- Lying about the amount you owe.
- Lie to everyone. (They can’t, for example, tell you you’re going to jail if you don’t pay. They can’t call pretending to be someone else.)