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If an individual or a business fails to pay its debts, several measures can be taken to ensure that this obligation is met. A Collection agency comes in if a person or a business defaults payment of a debt. Most of these businesses work on behalf of credits to get the debts paid and in return they are paid a certain agreed amount or a percentage of the debt collected.
Collection agencies are ranked as first party or third party agencies. The former is the first organization to pursue the debt. This is because it is easier to maintain a positive relationship with the debtor in case such an agency is used. This is because they are part of the creditors business or have an affiliation with it. Secondly, this agency is not limited by laws that govern the practices of third party agencies.
These businesses are referred to as first party agency since they are closely related with the creditor if not part of the organization of the latter. Consumers are the second party. In case efforts by the first party do come to fruition, then third party agents are brought in. They are not part of the original contract and their primary objective is to retrieve the debts if writing off debts is not an option.
Collection agencies are in fact the third party agencies. They earn a certain percentage of total debts collected. Their payments are made immediately the first portion of the debts is paid. This ensures they benefit in case the creditor resolves to terminate efforts to collect debts.
The fee paid to these agencies is typically between twenty and forty percent though it might be up to 50%. Hardly does the fee surpass this percentage.
These businesses in most instances send urgent letters demanding the debtor pays the debts promptly or face consequences like a hard collection or a credit report that is negative. These letters are typically sent within intervals of ten days. If there is no response, then a hard collection would be a possible response.
Many countries have however developed legislation that limits possible harassment or any form of unfair treatment of the debtor. This might include limiting the time a telephone call can be made to the debtor, protecting the debtor from threats or any illegal steps. The agency is also barred from misleading representations or discussing terms of the debt with a third party.
Various acts are in place in the US as well as UK that ensure discipline among collection agents. This is because there are many reasons as to why a debtor may default payment ranging from ill health, job loss to poor financial planning and lack of initiative to meet these obligations. In a bid to ensure good relations with debtors, creditors might decide to sell the claim to a third party which then pursues the payment.
Collection agencies are ranked as first party or third party agencies. The former is the first organization to pursue the debt. This is because it is easier to maintain a positive relationship with the debtor in case such an agency is used. This is because they are part of the creditors business or have an affiliation with it. Secondly, this agency is not limited by laws that govern the practices of third party agencies.
These businesses are referred to as first party agency since they are closely related with the creditor if not part of the organization of the latter. Consumers are the second party. In case efforts by the first party do come to fruition, then third party agents are brought in. They are not part of the original contract and their primary objective is to retrieve the debts if writing off debts is not an option.
Collection agencies are in fact the third party agencies. They earn a certain percentage of total debts collected. Their payments are made immediately the first portion of the debts is paid. This ensures they benefit in case the creditor resolves to terminate efforts to collect debts.
The fee paid to these agencies is typically between twenty and forty percent though it might be up to 50%. Hardly does the fee surpass this percentage.
These businesses in most instances send urgent letters demanding the debtor pays the debts promptly or face consequences like a hard collection or a credit report that is negative. These letters are typically sent within intervals of ten days. If there is no response, then a hard collection would be a possible response.
Many countries have however developed legislation that limits possible harassment or any form of unfair treatment of the debtor. This might include limiting the time a telephone call can be made to the debtor, protecting the debtor from threats or any illegal steps. The agency is also barred from misleading representations or discussing terms of the debt with a third party.
Various acts are in place in the US as well as UK that ensure discipline among collection agents. This is because there are many reasons as to why a debtor may default payment ranging from ill health, job loss to poor financial planning and lack of initiative to meet these obligations. In a bid to ensure good relations with debtors, creditors might decide to sell the claim to a third party which then pursues the payment.
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