Most people don’t really worry about how collection agencies operate until they are in a position where they are on the receiving end of communication from a collection agency. As our nation continues to struggle with a weak economy more and more people are finding themselves in a position they have never been in before. If you find yourself falling behind on monthly bill payments you may soon discover how frustrating, humiliating and intimidating it is to deal with a collection agency. By understanding how collection agencies work you will be better prepared if you find yourself dealing with one in the future.

What are collection agencies?

If a collection agency has contacted you it is likely they are a third party company that is separate from your original creditor. They may be working on behalf of the original lender or they may have purchased your debt from your original lender. In some cases your creditor will actually operate under a separate company name and address, but your debt is actually still being handled “in-house”. This is common for debt that is delinquent six months or less. In either case collection agencies are in business to collect unpaid debt.

How do they collect debt?

Collection agencies normally contact you via mail or by telephone. Once your account goes into collection you will likely begin receiving letters in the mail reminding you of your obligation and offering instructions how you can pay off your debt. In addition to letters creditors will likely contact you by phone as well. How you respond will determine what happens from this point, by not responding you can expect to see increasingly aggressive letters and phone calls as most collection agents work on commission. They get paid more when you pay your debt so they have a vested interest in convincing you to pay.

What happens if you don’t pay?

Since creditors and collection agencies have a legal right to try and collect a debt, they can continue to contact you as long as they stay within the Fair Debt Collection Practices Act. In addition to contacting you via mail or telephone, they can report the item to the credit bureaus, recommend a lawsuit, or if they own the debt, they can sue. They can NOT legally do any of the following:

• Make any public announcements or disclosures concerning your debt (except reporting to credit bureaus).

• Seize you assets, bank accounts or garnish your wages unless they have won a judgment from a lawsuit brought against you.

• Get you fired from your job.

• Threaten or carry out any physical violence.

Can you stop them from contacting you?

You have two options to stop the phone calls and letters. Obviously the first is paying off the debt, if that is not an option due to a financial hardship you have the right to notify the debt collector in writing that you wish the debt collector to cease communication in regard to your debt. Be forewarned that in many cases once a debt collector receives a cease and desist notification the chances of getting sued increase as the collection agency has no other avenue to try and collect the debt.