The phrase collection agency is commonly applied to third-party agencies, named that because they were not a party to the original contract. The creditor designates accounts directly to such an agency on a contingency-fee basis, which commonly initially costs nothing at first to the creditor or merchant, except for the cost of communications. This on the other hand is dependent on the individual service level agreement that exists between the creditor and the collection agency.
The agency will thenceforth secure a percentage of the debt that is successfully collected; occasionally known in the industry as the "Pot Fee" or potential fee upon successful collection. This does not automatically have to be upon collection of the full balance and very frequently this fee is paid by the creditor if they cancel collection efforts before the debt is collected. The collection agency makes money only if money is collected from the debtor. Depending on the category of debt the fee ranges from 10% to 50%.
Certain agencies propose a flat fee, typically $10.00, "pre-collection" or "soft collection" service. The service sends a string of increasingly high priority letters, usually ten days apart, instructing debtors to pay the amount owed directly to the creditor or risk a collection action and negative credit report. Depending on the circumstances of the contract, these accounts may transition to "hard collection" status at the agency's regular rates if the debtor does not reply.
In the United States, consumer third-party agencies are governed by the Fair Debt Collection Practices Act of 1977 (FDCPA). This federal law is governed by the Federal Trade Commission or FTC. This act limits the hours during which the agency is permitted to contact the debtor and prevents communication of the debt to a third party. It also prohibits false, deceptive or misleading representations, and prohibits the agency from making threats of actions the agency cannot lawfully or does not intend to take.
In the United Kingdom third party collection agencies that pursue debts regulated by the Consumer Credit Act must themselves hold a Consumer Credit Licence; this is a requirement under the Consumer Credit Act 1974.
Licenses are distributed and regulated by the Office of Fair Trading a government body which protects consumers from wrongful traders. In order to retain their license third party agencies must work within the framework outlined within the 2003 fair debt collection guidance.
The agency will thenceforth secure a percentage of the debt that is successfully collected; occasionally known in the industry as the "Pot Fee" or potential fee upon successful collection. This does not automatically have to be upon collection of the full balance and very frequently this fee is paid by the creditor if they cancel collection efforts before the debt is collected. The collection agency makes money only if money is collected from the debtor. Depending on the category of debt the fee ranges from 10% to 50%.
Certain agencies propose a flat fee, typically $10.00, "pre-collection" or "soft collection" service. The service sends a string of increasingly high priority letters, usually ten days apart, instructing debtors to pay the amount owed directly to the creditor or risk a collection action and negative credit report. Depending on the circumstances of the contract, these accounts may transition to "hard collection" status at the agency's regular rates if the debtor does not reply.
In the United States, consumer third-party agencies are governed by the Fair Debt Collection Practices Act of 1977 (FDCPA). This federal law is governed by the Federal Trade Commission or FTC. This act limits the hours during which the agency is permitted to contact the debtor and prevents communication of the debt to a third party. It also prohibits false, deceptive or misleading representations, and prohibits the agency from making threats of actions the agency cannot lawfully or does not intend to take.
In the United Kingdom third party collection agencies that pursue debts regulated by the Consumer Credit Act must themselves hold a Consumer Credit Licence; this is a requirement under the Consumer Credit Act 1974.
Licenses are distributed and regulated by the Office of Fair Trading a government body which protects consumers from wrongful traders. In order to retain their license third party agencies must work within the framework outlined within the 2003 fair debt collection guidance.
About the Author:
Jonathan Summers works diligently in business to business debt collection and peaks the listings of each and everydebt collection agencies and is here to assist with each and every of your wants.
Comments (0)
Post a Comment