Debt Collector

A debt collector refers to an individual or agency that pursues payments on debts owed by individuals or businesses. In the case of a collection agency, it operates as an agent of the creditor. The collection agencies collect the debts at a percentage of the total money owed.

We also have agencies that are referred to as ‘debt buyers’. These agencies purchase debts from creditors for a fraction of the value of the debt. They then pursue the debtor to recover the full amount owed.  Creditors normally hire collection agencies so that they can remove the owed debts from their accounts receivable. The creditors then write off as a loss the difference between the amount collected and the actual amount of the debt.

A collection agency acts as a debt collector on behalf of the creditor. Countries that have collection agencies have laws that govern the agencies. The laws prohibit the agencies from any abusive practices. Some of the collection agencies are subsidiaries of the companies that own the original debt and for this reason they are referred to as ‘first party agencies’. They are part of the first party to the contract, that is, the creditors. The second party in this case refers to the debtor

First party agencies normally get involved early in the debt collection process so that they can help maintain a good customer relationship. Third party agencies are normally not part of the original contract. The creditor normally hires them as a debt collector on a contingency-fee basis. The agency in this case is entitled to a certain percentage of the debt that it manages to collect.

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Tagged with: Collector • debt

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