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The Bill Collection Process Step #2 The Collection Agency

Now is when the real fun begins. Please excuse my sarcasm. Out of the entire debt collection process most people consider this one the nastiest. So let's take a look at the Step #2 in the debt collection process, the collection agency. Once your debt is charged-off it will likely be sold to an independent collection agency. The collection agency will probably pay a few cents for every dollars worth of debt they purchase. If they pay five dollars for a hundred dollar debt and accept a fifty five dollar settlement then they’ve made fifty dollars. Well, they’ve made fifty dollars minus the expense of sending all those letters and making all those phone calls.

At their best, collection agencies find people who legitimately owe money and collect it. And on the other hand their actions have been so outrageous that Federal legislation was passed to attempt to stop their harassing tactics. The Fair Debt Collections Practices Act gives you the ability to rein in, and hopefully stop, abuse by collection agencies. But let’s be clear, debt collection agencies are legitimate businesses and have a legal right to attempt to collect debts.

Your Legal Notification

When your debts go to a collection agency they are required to notify you by mail that they’ve taken over the account and are attempting to collect on it. While the collection agency is required to notify by mail that they’ve taken over the account many of them like to get in sneak phone attacks. When the collection agency sends out your written notice you become fair game even if you haven’t yet received the notification. Once your original creditor charged-off your debt they would stop calling you. This may give you the sense that it is okay to answer the phone again. But watch out because you’re likely to get a phone call from someone you’ve never heard of, the collection agency, asking you to pay your bill. Well, if you’re lucky they’ll ask. I’ve heard from many people that these initial phone calls can be very demanding and upsetting.

They want you’re money and they want it now. Here’s why. The collectors that work at collection agencies work on commission. If you send in money they get paid. Many receive little or no training they are just put on an automated dialer and are told to collect money. Some, however, have become very sophisticated in the psychological aspects of collection. You may find your best buddy who’s trying to help you out of an unfortunate circumstance. Or, you may find a screaming maniac, who thinks you are a lying, cheating, no-good piece of, well, they will unmercifully attack until you send in money. They will take no prisoners, only money.

Debt Validation

Within the initial written notification from the collection agency is information telling you that you have thirty days in which to dispute the accuracy of the debt. This is usually in either fine print or buried at the bottom of the letter in a way that you’re unlikely to either read or understand it. However if you do challenge the validity of the debt the collection agency must go back to the original creditor and verify that the debt is accurate. During the time that the debt is being validated no further collection activity may take place.

If you have reason to believe that the debt is not accurate or if you are looking for a way to delay the collection process challenging the debt’s validity is a legal option for you. As far as I know the exact legal specifications of what constitutes a proper validation have not been determined. This may happen at some point through legal decisions or legislative action but for now it is a murky issue. The response to the validation request may range from the dropping of the collection activity to a letter from the collection agency stating that the debt is indeed valid. It’s also possible that you’ll receive a large packet of information including all you past statements, credit application, and cardmember agreement.

The Pressure is On

Once the debt is validated, or if the thirty day period in which you can challenge the debt has elapsed, you may be subjected to intense collection activity. It is possible that your debt will from one collection agency to another. It is also possible that your debt will wind up in the legal process. So let’s move on the step three in the debt collection process, The Legal Process


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See how long it will take for your debt to get paid off with one of these four options. We have listed a standard debt amount as a default on the debt calculator. You will need to enter your current personal or business debt amount below to see what your debt payoff amounts will reflect.

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PLEASE NOTE: This calculator gives you an estimate of how much it will cost you to get out of debt, how long it will take and how much your monthly payment may be with the different options to pay off your debt. Keep in mind "Minimum Payments" assumes you NEVER make any further purchases on your credit cards and the credit card companies NEVER raise the interest rate on your cards in the future from the rate calculated above. The "Debt Consolidation Loan" example is usually only possible when taking out an "equity line of credit" or "second mortgage", which involves securing your unsecured debt with your home. This is a very risky option for most people because the home could be foreclosed if you cannot make the payments.