There is a one in a million chance that most people don’t know who or what a ‘debt collector’ is; well, at least one in a few thousand! When most economies faced recession and debts mounted, millions of people were left with undervalued assets that struggled to meet rising costs and deal with the debts that had accumulated.
The introduction of ‘plastic money’ or credit cards created a huge market even for people who didn’t have the real money to go out and buy things without a care in the world. Suddenly, the consumer became “king” and every bank or commercial agency was issuing credit cards to anyone who could show some kind of proof of income. Soon many found themselves in debt beyond their limited income.
That’s where the debt collector comes in! A ‘debt collector’ is the term used to denote a person or agency that regularly collects debts owed to creditors. Debt collection is the practice carried out by lenders and creditors to guarantee payments from people and companies that are legally obligated to pay the money they owe. Every debt recovery agency or debt collection agency should be aware of the regulations involved and the legal obligations involved in debt collection.
Debt collection covers unpaid bills or accumulated unpaid amount against personal payments such as credit card bills, car or mortgage loans, medical bills, household debt, etc. This usually involves a single person known as a collector or an agency known as a collection agency. The business of such an agency operating as a ‘creditor’s agent’ is to go after debtors who owe sums of money to creditors. They collect debts for a fixed fee or an agreed percentage of the total sum owed by the debtor.
There are several types of debt collection agencies.
• First Party Agencies – These are often direct agents such as paid employees or subsidiaries of the creditor (an individual or a business)
• Third Party Agencies – are outside agencies hired by a creditor business or individual to pursue the debtor and collect amounts owed; the service is performed for a fee.
In some cases, ‘debt buyers’ buy delinquent debt at a pre-agreed percentage of value and then contact the debtor to collect it, usually with a fee both ways to cover the costs.
Globally, each country has its own set of rules and regulations that cover debt collection. All countries have established consumer protection laws to protect consumers against bad practices by debt collection agencies. Various consumer protection agencies around the world advise consumers and clients to educate themselves and inform themselves about the laws regarding debt; ‘knowledge is power’ to safeguard oneself.
Even though there are laws to regulate debt and debt collection, cases of debt evasion by debtors and harassment by debt collection agencies are on the rise. Debt collectors may not engage in illegal or deceptive practices, such as deceiving and falsifying information about the amount of money owed, posing as an attorney or solicitor, etc.
Common examples of harassment by debt collection agencies are:
• Nuisance and repetitive phone calls to the debtor or to the debtor’s relatives
• Use of obscene or harsh language
• Threats of physical harm, violence, or causing fear and anxiety by threatening legal action
• Publication of debtor information in publications
• Hide your identity and violate the privacy of a debtor
Regulations are in place to ensure consumer safety and protection. If the debtor is in dire financial straits, a third-party intermediary, such as an advocate or attorney, can liaise between the collector and the debtor and come up with an acceptable settlement plan. However, if the consumer or debtor sues the collector for any violation under established laws and wins the case, the collector is obligated to pay all legal fees and any damages caused to the debtor.
However, the best advice offered to a debtor is to know their debts in full, keep track of the payments made and, in general, maintain open communication with the collection agency to avoid unpleasant situations and unwanted anxieties. .