Debt collection

Collection Bureau Brick Building, Little Falls, Minnesota (35241011591)

Debt collection is the process of pursuing payments of debts owed by individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed.

History

Debt collection has a long history, dating back to ancient civilizations. In ancient Mesopotamia, debtors who could not pay their debts could be sold into slavery. In Ancient Rome, debtors could be imprisoned or forced into servitude. The practice of debt collection has evolved significantly over the centuries, with modern laws and regulations governing the process to protect consumers.

Methods

Debt collectors use various methods to collect debts, including:

• **Letters and phone calls**: The most common method, where collectors contact debtors to remind them of their obligations.
• **Legal action**: If initial attempts fail, collectors may take legal action to obtain a judgment against the debtor.
• **Garnishment**: After obtaining a judgment, collectors may garnish the debtor's wages or bank accounts.
• **Repossession**: In cases of secured debts, collectors may repossess the collateral, such as a car or property.

Regulations

Debt collection is regulated by various laws to protect consumers from abusive practices. In the United States, the primary law governing debt collection is the Fair Debt Collection Practices Act (FDCPA). The FDCPA prohibits debt collectors from using deceptive, unfair, or abusive practices and provides consumers with certain rights, such as the right to dispute a debt.

Consumer Rights

Consumers have several rights when dealing with debt collectors, including:

• **Validation of debt**: Consumers can request verification of the debt within 30 days of the initial contact.
• **Cease and desist**: Consumers can request that collectors stop contacting them, except to inform them of specific actions.
• **Dispute**: Consumers can dispute the debt if they believe it is not valid.

Impact on Credit Score

Unpaid debts can negatively impact a consumer's credit score. When a debt is sent to collections, it is reported to the credit bureaus, which can lower the consumer's credit score and affect their ability to obtain credit in the future.

Related Pages

• Credit score
• Fair Debt Collection Practices Act
• Collection agency
• Credit bureau
• Garnishment
• Repossession