When asked about “what collection agencies do?” most people think of the debt collector that has been trying to contact them about some unresolved debt. What people don’t realize is that there are two, very distinct, business models in the collections industry which go about collecting delinquent accounts in different ways.
In short, a debt collector is simply a person trying to collect an outstanding balance. In most cases they work for a third part collection agency, however, they can be from the original creditor as well. The Fair Debt Collection Practices Act (FDCPA) currently only covers third party collection agencies.
Essentially, collection agencies offer a service to businesses that allow creditors to outsource collections to a third party. When accounts become delinquent (in many cases 60 or more days late) creditors may contract with a collection agency to pursue payment. What’s important to note in this scenario is that the collection agencies do not own the debt. The amount owed by the consumer is still owned and controlled by the original creditor. In this situation, the collection agency works as a middleman between the consumer and the creditor in exchange for a percentage of the amount collected. A large majority of collection agencies operate this way, meaning that they are compensated only when they are able to successfully collect on an account.
When the original creditor decides they no longer want to own the account they sell the debt. In this scenario, the creditor will put together a “package” of delinquent accounts and sell it to a “debt buyer”. The advantage of purchasing these hard-to-collect debts for the buyer is that they have claim to all the money they can recover and are no longer required to involve the creditor in what settlement to offer. After obtaining ownership of the debt, the debt buyer may try to collect on the account themselves or they might hire a collection agency on commission to complete the work as described above.
Learn more from our other FAQ articles:
ACA International is the largest membership organization in the accounts receivable management industry.
Convergent Outsourcing is a third party collection agency that works on behalf of the creditor. We abide by the FDCPA regulations and strive to make the collections process as stress-free as possible by providing top of the line customer service and support. If you have a question about your debt, please call our help line 1-800-444-8485 to speak with a representative any time Monday-Friday from 7am-5pm PST. You may also fill out our online contact form and a representative will be in touch with you shortly.
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In business since 1950, Convergent is one of America’s leading collections agencies. As an accredited agency, all of our representatives are thoroughly trained on customer service and Fair Debt Collection Practices Act compliance. We believe in customer service and want to make it easy as possible for people to pay the debts they owe.
800 SW 39th Street, Suite 100
Renton, WA 98057
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Monday to Friday
New York City Residents: Please be advised that language access services, including the translation of information into a language other than English, may be available. A translation and description of commonly-used debt collection terms is available in multiple languages on the New York City Department of Consumer and Worker Protection’s website, www.nyc.gov/dca