Debt collection is usually performed by a collection
agency. the term collection agency is usually applied to third-party
agencies, called such because they were not a party to the original
contract. The creditor assigns accounts directly to such an agency
on a contingency-fee basis, which usually initially costs nothing
to the creditor or merchant, except for the cost of communications.
This however is dependent on the individual service
level agreement (SLA) that exists between the creditor and the collection agency.
The agency will then take a percentage of the debt that is successfully
collected; sometimes known in the industry as the "Pot Fee" or
potential fee upon successful collection. This does not necessarily
have to be upon collection of the full balance and very often
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 (often known as a "No
Collection - No Fee" basis).
RESOURCES: Debt Collection
FTC: Fair Debt Collection
FTC Bureau
of Consumer Protection - Consumer Information: Credit & Loans
Credit Report
and Score Information from Experian.com
TransUnion
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Equifax
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Personal Finance
Money Tip: Prioritize your bills. No matter what a debt collector says, an unpaid credit card bill is not the most important bill you have to pay this month. Providing necessities for your family comes first. |
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