Chances are one in a million that most people don’t know who or what a ‘debt collector’ is; well, at least one in a few thousands! When most economies faced recession and debts mounted, there were millions of people left with undervalued assets who faced hardships facing rising costs and tackling debts that had mounted.
The introduction of ‘plastic money’ or Credit Cards created a huge marketplace even for people without the actual money to go out and shop for 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 substantiate some kind of income proof. Soon many found themselves in debt beyond their limited incomes.
That’s where the debt collector makes an entrance! 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 money lenders and creditors to secure payments from individuals and businesses that are bound legally to repay 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 collecting debts.
Debt collection covers any unpaid bills or unpaid amount accumulated against personal payments like credit card account, vehicle loan or mortgages, medical bills, household debts etc. This usually involves a single individual known as collector or an agency known as a collection agency. The business of such an agency that functions as an ‘agent of the creditor’ is to pursue debtors who owe sums of money to creditors. They collect debts for a fixed fee or for an agreed percentage of the total sum owed by the debtor.
There are various types of debt collection agencies.
• First party agencies – often they are direct agents like paid employees or subsidiaries of the creditor (an individual or company)
• Third party agencies – these are outside agencies contracted by a creditor company or individual to pursue the debtor and collect the amounts owed; the service is done for a fee.
In some cases, ‘debt buyers’ purchase delinquent debts at a pre-agreed percentage of the value and then contact the debtor to collect it, usually with a mark-up both ways to cover costs.
Globally, every country has its own set of rules and regulations covering debt collection. Every country has put in place consumer protection laws to protect consumers against malpractices by debt collection agencies. Several consumer protection agencies worldwide advise consumers and customers to be educated and informed about the laws concerning debts; ‘knowledge is power’ to safeguard oneself.
In spite of laws being in place to regulate debts and debt collections, instances of debt evasion by debtors and harassment by debt collection agencies are mounting. Debt collectors cannot engage in illegal or misleading practices such as deception and falsified information about the amount of money owed in debt, pose as a lawyer or attorney, etc.
Common examples of harassment by debt collection agencies are:
• Annoying and repetitious phone calls to the debtor or debtor’s family members
• Use of obscene or rude language
• Threats of physical harm, violence or causing fright and anxiety by threatening legal action
• Publishing information of debtors in publications
• Hiding their identity and infringing upon the privacy of a debtor
There are regulations to ensure consumer safety and protection. If the debtor is in dire financial situation, a third-party intermediary like an advocate or attorney can liaise between the collector and debtor and arrive at a settlement scheme that is acceptable. If however, the consumer or the debtor sues the collector for any violation under established laws and wins a case, the debt collector is bound to pay all legal fees and any damages caused to the debtor.
However, the best advice offered to a debtor is to know his or her debts fully, keep records of payments made and generally maintain an open way of communication with the collection agency to prevent unwanted anxiety and unpleasant situations.