The words “collection agency” evoke a great deal of emotion. Consumers hate hearing from them. Businesses hate having to use them. Still, the idea of a third party recovered money owed to someone else is as old as dirt, and there are new players coming into the debt collection marketplace everyday. It seems the debt collection industry is here to stay.
And we should want the debt collection industry to stay, since a 2013 study by the debt collection association ACA reports that net assets recovered of nearly 45 billion dollars in the United States alone
Most of the news about the debt collection industry involves companies who seek to collect debt from consumers (as opposed to commercial debt collectors, who collect debts owed by businesses). A simple search for “stop debt collectors” or “debt collection scams” yields a wealth of results, which is why State and Federal resources have been dedicated to oversee the industry and its players.
The licensing of consumer collection agencies is handled at the state level, usually by the Department of Banking or Department of Consumer Affairs. Some states have no license requirements, others have stringent requirements and oversight. The US Consumer Financial Protection Bureau, established in 2010, has taken on oversight of larger collection agencies and also provides an avenue for consumers to register complaints.
There is also a law which provides guidelines for the industry. It is the Fair Debt Collection Practices Act, (FDCPA). The law protects the privacy of consumers and protects them from deceptive and abusive practices. It is NOT intended as a way to help consumers get out of paying the monies they owe. In fact, we believe that the law is intended as way to protect not only consumers but also the majority of American debt collection firms that are doing business the right way.
The law prevents third party collection agencies from revealing information to third parties or threatening actions they are not legally able to take. It sets hours for debt collection calls and prohibits deceptive and abusive practices.
Small businesses should take care to make sure their collection agency follows fair debt collection practices and has a procedure for training their collectors. In some states, the liability for FDCPA violations can also apply to the original creditor, so it is doubly important to take care in hiring your collection agency.
What do you look for when hiring a collection agency? Do you need help? Download our free guide today!