When it comes to the debt collection process there are two “sides”—the side of the consumer and the side of the creditor. Today we are going to focus on the creditor-side process. The Fair Debt Collection Practices Act, under the authority of the Federal Trade Commission, is the primary law governing debt collection processes. The act provides the federal government the authority to levy fines and penalties on collection agencies who are in violation of the codes specified in the act.

State laws also play an important part in debt collection governance. State laws stipulate things such as when a when and how a consumer can be contacted, who the creditor may contact about the debt, and the time frame in which a creditor can take action through the courts. In some states, for example, you are only allowed to contact the owner of the debt and you are barred from contacting anyone else, such as a spouse or employer.

Manager is holding document with title Debt collection.

The Process

When it comes down to it, debt collection is about collecting information. To collect on a debt you need to know about the consumer, when the debt occurred, what payments have been made and when, and any agreements that have been made between the original creditor and the consumer. This information helps the collector formulate the best plan for collecting on the debt. The way the rest of the collection process is handled is up to the collection agency themselves. Their internal practices will determine how the debt will be collected, including whether filing a lawsuit against the consumer is appropriate.

Collections agencies will typically reach out to consumers by mail or phone. A letter will be sent alerting the consumer about the attempt to collect the debt and asking them to contact the agency to verify the information they have on file. For phone calls, some agencies prefer scripts because they provide consistency in service. Other agencies, usually those with more experienced personnel, forgo the script. The initial phone call is a way to initiate a conversation about the debt. Once a basic sense of trust has been established discussions about repayment can begin. Consumers are often offered multiple payment options so that they have flexibility when making payments. Giving the consumer options also decreases the opportunities for making excuses about repaying the debt.

If the agency isn’t successful in recovering the debt in their initial contacts, they may initiate a legal lawsuit by serving the consumer with a Summons and Complaint. This process will typically result in the collections agency recovering a portion, if not all, of the debt owed.

Thank you for taking the time to visit our blog. Come back next week to learn more about the debtor side of the debt collection process.