What is a debt collector, and what do they do? , personal Finance

Loan borrowers are heroes or villains, depending on your point of view. If you own a business and you owe money, hiring a debt collector can help you get it back. If you are the person to whom the money is owed, you can avoid that confrontation with the debt collector.

Still, whatever your feelings about borrowers, often called bill collectors, the good guys are just 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 recover what they owe. debt collector Work for debt collection agencies, with the mission of convincing people to pay their dues. It can be a stressful and rewarding job all at once. Borrowers often come across many people who want to pay their bills but can’t afford it; Plus, while loans are helping businesses, there are many that can’t afford to incur unpaid bills.

There are many reasons to pay money to a company. According to the Consumer Financial Protection Bureau, $88 billion of medical bills are currently held by debt collection agencies, affecting 1 in 5 Americans.

A bill collector’s job is to try and help the person make payments, which helps to improve the debtor’s credit score, and also helps the business owner.

If you are working as a debt collector, you will probably be in a collection agency’s call center rather than the original creditor’s office. Although it may seem like a stressful job, it is reported to be a profession with average work stress. There are a lot of advantages too, especially if it is a full time job with benefits. The odds of getting a job are low – you’ll need a high school diploma – although you may need more education if you want a higher-paying position. Many bill collectors report having a healthy work-life balance.

How debt collection agencies work

Debt collection agencies have one main mission – to persuade someone to pay the money owed on the loan. Often, if the loan is substantial, this is done by arranging installment plans. Generally, borrowers will contact debtors by phone or mail. A new rule by the Consumer Financial Protection Bureau that took effect on November 30, 2021, states that borrowers are allowed to contact debtors via email, text and social media. If a borrower reaches out through social media, it should be through a private message, not 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 collection agencies: first-party creditors and third-party creditors.

A first-party creditor is not a debt collection agency so much as a debt collection wing, or a subsidiary or affiliate of a company. If you have someone from your credit card, auto loan lender or a financial institution who got you to hold onto the loan, you have worked with a first-party creditor.

Third-party creditors are collection agencies or debt buyers. These collection agencies are often hired by first-party creditors, often after 30 days from the bill’s due date and once the first-party creditor sees there is any point in spending more time and effort collecting the debt. Not there.

Often, third-party creditors purchase the right to try and collect the bill within 30 days to six months — and possibly a year or two or longer.

These collection agencies are expected to collect the debt in a responsible manner. For example, they are not allowed to humiliate you or harass you. They cannot send anyone to your house to ask for money. They must call no more than seven times in any seven-day period, and if you speak to a debt collector, they must wait seven days before calling you again. They will not call you at work or before 8 a.m. or after 9 p.m.

But some debt collection agencies cross their limits by ignoring these rules. In 2021, the Federal Trade Commission issued more than $4.86 million in refunds to consumers who were harmed by illegal debt collection practices.

Nevertheless, there are a lot of debt collection agencies that are reputable, and they provide a much needed service. If you are a small business owner who simply cannot be duped for money, a debt collection agency can be a lifesaver.

As far as how they make their money, debt collection agencies sometimes work on commission – they will get a portion of the debt repaid to the company. And sometimes the debt collection agency, or loan buyer, buys the loan. According to the Minnesota Attorney General’s website, “It is not unusual for a loan buyer to pay less than five cents per dollar.”

So a loan buyer can purchase a $1,000 loan for $50 or less. If the loan buyer can convince the person who has the money to pay $1,000, that’s a profit of $950. If the loan buyer can at least convince the indebted consumer to pay, for example, $300, he still has a profit of $250.

What to do if a debt collector contacts you

One thing you should do is to stop for a while. It’s not that you shouldn’t pay your debt due, but you do have some information to collect first.

For starters, it may not be an actual debt collector you’re talking to.

“One of the biggest issues with paying off debt, especially student loans, is the frequent issue of bogus phone calls from borrowers as well as those offering debt relief. Knowing who to trust in this environment can be difficult,” says Melanie Hanson, senior editor at EducationData.org, which provides data about the American education system.

“As a good rule of thumb, never rely on phone calls based on your strengths,” advises Hanson.

She suggests verifying anything you hear about your student loans by checking with a debt collector on the Internet and, ideally, checking your loan accounts directly with your lenders.

“Fake collectors and counterfeit relief programs thrive on obtaining personal information from trusted debtors who think they are talking to an officer,” Hanson says.

Ashley Morgan, a bankruptcy attorney who lives in Herndon, Virginia, as the Ashley F. Morgan Law’s owner agrees that you don’t want to agree to pay off debt in a hurry, even if you’re pretty sure you’re owed money.

“If a debt collector contacts you, it’s important to verify the loan,” Morgan says.

She also recommends not admitting over the phone that you are owed money. After all, maybe you don’t, and this isn’t the time to give a debt collector ammunition they can use against you later. Instead, Morgan says, “you should request that they send you written correspondence about the debt they think you owe them.”

Once you have that information, if you have any questions about the loan, you should send a request for the information in writing, Morgan says.

“The information requested is important to help you determine whether the loan is actually owed, and if the debt collector has the ability to collect the debt,” Morgan says. She points out that debt can come under the statue of limits. After three to six years, and possibly longer — depending on state law — the debt often can’t be collected. As in, no one can sue you for debt.

In fact, you may want to be careful about making partial payments on an extremely old loan. In some states, if you do this, the time period will start again, and suddenly the stat of the borders may not expire for several more years.

It also helps to learn everything about you Consequences of non-payment of debt – such as seeing a drop in your credit score. remember that you can negotiating with borrowers And ask them to agree to allow you to pay a lesser amount than what is owed. Know your rights with a debt collector so you know whether you should report them to the Federal Trade Commission or the Consumer Financial Protection Bureau. Some of the tricks that borrowers are not allowed to do include:

  • calling you before 8 a.m. or after 9 p.m.
  • Calling you over and over again.
  • Posting any message on social media about your debt.
  • Using obscene language or abusing words while talking to you.
  • To make threats
  • Publishing a list of those who refuse to pay the loan. (However, they can report the information to the credit reporting company.)
  • Lying about the amount you owe.
  • Totally lying to you. (For example, they can’t tell you that you’re going to jail if you don’t pay. They can’t pretend to be someone else.)

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