Debt Collection Businesses

Debt Collection Businesses

Debt collection businesses are considered highly lucrative, though often blamed among the public as illegitimate concerns. However, debt collection is an essential process to avoid business losses. It is also impractical for a business group to nag debtors to collect debt amounts. Debt collection agencies make sure that debts are repaid. From fragmented debt collection offices, the business has now grown to corporate establishments. Many debt collection agencies are now focused on international Debt Collectors. Debt collection has even become the ideal entrepreneurship with safe returns.

Debt collection businesses generally work on a network system to ensure satisfactory service for the client, irrespective of locations. Larger concerns appoint franchisees to regulate local services. Local debt collection agencies still have their place in the map. They are assigned to collect low amounts. Debt collection agencies offer personalized services to gain the confidence of their clients. They have to adopt a strategy to collect debts, without disturbing the customer relationships of the client. Most agencies resort to various tactics instead of abusive measures. The professional attitude and working pattern help to achieve time bound results.

Debt collection businesses have to work according to the regulations of the Fair Debt Collection Practices Act. The federal law restricts bogus actions against debtors. They include proficient staff well versed in FDCPA, with necessary skills to enhance efficiency. They also incorporate various tools, including software to regulate office proceedings, automated dialing system, messaging system and other devices. They usually adopt a step by step procedure to revenue the debts. Litigation is only the last resort in the debt collection process.

Debt collection businesses generally work on a commission basis. They charge 20%-50% of the collected amount, depending on the complications of the case. Debt collection agencies also extend online debt collection, debt consolidation, credit reporting, letter services and accounts receivable outsourcing. Some agencies buy statute expired debts, most of which are highly profitable if the debtors can be prompted for repayment. Debt collection businesses thus play the role of a one stop shop for all payment issues.

Debt collectors in the past had a lot of leeway and it wasn't uncommon for collectors to embarrass, harass or humiliate debtors by adopting extra-legal measures. In the absence of any regulatory regime the courts had to step in by laying down guidelines for the industry to follow. After the intervention of judiciary, the RBI woke up to the need of regulating the unruly collection agencies and laid down its own guidelines for the banking industry to follow.

The guidelines prescribed by RBI are enforced against the banks that have contractually employed collection agencies. The banks in turn via their contracts with the collection agencies ensure that the RBI guidelines are followed. Now, under the RBI guidelines it is illegal to threaten violence or cause harm to debtor, use obscene language, or repeatedly use the phone to harass debtors. In addition, collection agents cannot seize or garnish a consumer's property or wages without recourse to court procedure.