Collection is the process by which creditors attempt to get payment from nonpaying debtors. This process can be performed by the creditor or by a collection agency that the creditor has hired. A collection agency is a company that aggressively pursues debtors to collect money for the creditor.
Collecting Money Owed to Me
There are several debt collection practices that you can use to try to persuade your debtor to pay the debt:
- Reminder invoice - Send the debtor another invoice to remind them how much the debt is and that you still want the debt paid.
- Formal demand notice - Send the debtor a letter stating that you demand timely payment.
- Call or visit the debtor - If the laws of the debtor's state allow it, personally call or visit the debtor and ask him or her to pay the overdue bill.
- Hire a collection agency - Ask a collection agency to persuade the debtor to pay. A collection agency typically takes a percentage of the money due as compensation. Should you choose to hire a collection agency, be sure to check the agency's credibility with the Better Business Bureau and the Attorney General's Office.
What Can a Collection Agency Legally Do to Collect Payments?
Collection agencies tend to use aggressive tactics to collect money owed. These tactics, however, must not violate the Fair Debt Collection Practices Act (FDCPA). This act limits what actions a collection agency can take in its effort to collect payments.
For example, a collection agency cannot:
- Use threats of violence or harm
- Contact any third party about the debt owed
- Use obscene language
- Use the phone to annoy or irritate someone
- Falsely misrepresent themselves as attorneys, government officials, or any other entity
- Make false or misleading statements
- Declare that they will take unlawful action if payment is not made
There are also several things a collection agency must do once it has contacted a debtor. The collection agency must disclose:
- The amount of the debt
- The name of the creditor
- The timeframe in which the debtor can dispute the amount owed
What If a Collection Agency Has Violated the FDCPA?
There are several things a debtor can do if a collection agency has done anything illegal in violation of the Fair Debt Collection Practices Act (FDCPA).
- Ask them to stop - Tell the collection agency that they should stop contacting you. Doing so means that they can no longer contact you except to tell you that they are suing you for the amount owed or that they will stop trying to collect the debt.
- File a complaint with the FTC - Write to the Federal Trade Commission (FTC) and inform them of the collection agency's violation.
- Sue the collection agency - If the collection agency has repeatedly violated the FDCPA you may want to sue the collection agency. You may be entitled to normal damages in addition to statutory damages of up to $1,000 for violations of the FDCPA.
Do I Need an Attorney for My Collections Problem?
An adept attorney can help send demand letters to debtors who owe you money, or determine whether a creditor is violating the FDCPA. If you are forced to go to court, an attorney can guide you through the complicated legal process. Whether you are the debtor or the creditor, a lawyer will know all the ins-and-outs of debt collection and help get the results you want.