Collection agencies act on behalf of their business clients who are unable to get paid for a product or service rendered, such as medical and cell phone services. The collection agency tries to collect the amount owed to the original creditor, in addition to their fees that are tacked onto the original debt. The original creditor can hire a collection agency to collect for them, or they can sell the debt to a collection agency in its entirety.
When a collection agency purchases charged off debt from the original creditor, they will generally get a list of multiple accounts with client information such as name, address, telephone and account numbers. Generally, the more data shared by the original creditor, the higher the cost is to purchase the debt. How do they get this information you ask? From the application or forms you completed when the services were rendered to you. This could include your employer, salary, references and other personal information.
After purchase of the data, the collection agency will immediately begin sending you collection letters and if they don’t receive payment from you , then the phone calls begin. If the collection agency is unsuccessful in collecting from you, they will then determine best strategies moving forward. This can include: passing your debt on to an attorney for collection or selling the debt to another collection agency. The determination to proceed with an attorney is likely based on whether you are currently employed or have other assets from which they can collect, or whether the contract calls for the collection of the attorney’s fees (most loans and credit contracts do) – which means the collection agency can then include its lawyer’s fee into a judgment against you.
If the collection agency proceeds with legal action, you’ll likely get a notice from someone showing up at your door to serve you court documents, or a letter from your employer letting you know there is someone seeking to garnish your wages. If the collection agency decides to sell your debt to another collection agency, guess what? Yep, the collection practices can start all over again, including with a new collection item added to your credit report….same debt, but with another agency.
Only one debt collector can report on an unpaid debt. This doesn’t include the original creditor and once the original creditor transfers or sells the account to a debt collector, that debt collector may also report the debt, which will leave two negative accounts reporting for the same debt but that’s it! It is a violation of the Fair Creditor Reporting Act to duplicate reporting of the same debt and constitutes inaccurate credit reporting.
Remember that unpaid collection accounts can get sold from one debt collector to another and leaving you with multiple collection accounts for the same debt, but it’s your job as the consumer to review your credit report and report the violations. If you’re unsure how to handle collection accounts, give me a call or schedule an appointment @ www.jpcreditconsulting.com