Debt collection agencies are formed for Individuals or businessmen who don’t pay at the same time and don’t follow the rule of payments. For this purpose, debt collection agencies are formed — a kind of organizations which is specialized for collecting the debt. Most agencies operate themselves as agents of creditors and collection is done based on percentage or fee of the total debt they recover.
Debt buyer also plays a vital role by purchasing the debt on a percent basis and later collecting it altogether.
Debt Collection Agency in history
Here is the history of a debt collection agency
- Debt collecting is based on an earlier system of bartering. Ancient civilizations which taken the period 3000 BC.
- 3000 BC holds debts from slavery. In this, is debt is Owed then there is no way of paying back. Family suffers and losses were recouped using physical labouring.
- Babylonian law says strict rules and regulation to be followed in the repayment of the debt, including protection also.
- Some societies earlier carried the debts into generations.
- 1930s great depression relied heavily upon the collecting of debts, which resulted in negative public perception.
Types of debt collector
- First Party agencies
Known as also the subsidiaries of the original company, they maintain practical customer relation by not interfering first in the whole process. As the original creditor, first-party agencies are not subjected to the legislation that governs third party agencies.
The first party refers to creditors and the second part refers to debtors.
Its a first try of the first party agencies to collect the debts earlier before reaching it to the third party to make most of its value.
- Third-Party agencies
A company which makes a contract by several other companies on a few bases. They aren’t included in the original contract. Accounts which are assigned to them are on a fee basis. It follows the individual service level agreement, which literally states that this contract exists between the creditor and the collection agency. Collection of money is done on No Collection No Fee Basis.
- Third-party agencies in the United States are sub estates the Fair Debt Collection Practices Act of 1977, administered by Federal Trade Commission.
- The United Kingdom also pursues debts regulated by the Consumer Credit Act, which is approved by the Financial Conduct Authority.
Collection practices are done by motivating the debtors to pay the debt. There is also a collection account which is a kind of person’s loan or debt that creditors submit through the debt collection agency. Re-ageing of debt is also done when the debt expires due to limitations; in this case, debt collector did the payment by themselves.