Collection Agency Basics: Who They Have To Answer To Part Two

In the first article of this series I explained what a collections account was. It is a delinquent account that generally runs 90 to 120 days late. Collections accounts will either be collected by the original creditor itself, or sent out to collection agencies. Sending an account out to a collection agency benefits the creditor because they can both write the debt off on their taxes and collect profit on the money owed.

Sometimes old debt will be sold to a third party collection agency who becomes the new creditor. This old debt will be collected or sold to another agency until it is paid or the statute of limitations (usually seven years but it differs by state) runs out. At this point, a third party debt collection company doesn’t have the authority to negatively mark your credit score or take legal action against you, but they are legally able to send letters to you and persist with the collection phone calls.

Collection companies will get a hold of the following information to coordinate a game plan to collect the money that they are attempting to obtain: the name and address of the consumer and a record of all correspondence with them, the amount that is owed by the debtor and the date of the last payment. A collection company has the authority to pull a credit report on a consumer and communicates with the credit bureaus often to keep information current.

All third party collection agencies are governed by Federal (Fair Credit Reporting Act and the Fair Debt Collection Practices Act) and state laws that are generally very strict. They report to the Federal Trade Commission, which tracks statistics and complaints about third party collection agencies.

It is only a very rare case in which the Federal Trade Commission will get involved in a single complaint about a debt collection agency, but if the agency notices a trend that many people are complaining about the same agency it will look into it.

Rapid Recovery Solution is a commercial debt collections company that writes about commercial collection agencies.