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Credit Cooperative for Credit and Debt Collection Professionals
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Professional Debt Collectors Cooperative brings together debt collection professionals worldwide to form a members-only cooperative of entrepreneurs, collectors, managers, debt buyers and affiliates of the debt collection industry. We offer and promote services unlike any other professional debt collector membership organization because we utilizes all aspects of the credit and collection industry to unite and meet the common economic, social and cultural needs of the key individuals that collectively drive the credit and collection industry.
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The Business of Debt Collection
Debt collectors often work for debt-collection agencies, though some operate independently, and some are also attorneys. Sometimes these agencies act as middlemen, collecting customers’ delinquent debts – debts that are at least 60 days past due – and remitting them to the original creditor. The creditor pays the collector a substantial percentage, typically 25% to 45%, of the amount collected. Debt collection agencies collect delinquent debts of all types: credit card debt, medical debt, automobile loan debt, personal loan debt, business debt, student loan debt, and even unpaid utility and cell phone bills.
Collection agencies tend to specialize in types of debt. For example, an agency might only collect delinquent debts of at least $200 that are less than two years old. A reputable agency will also limit its work to collecting debts that are within the statute of limitations, which varies by state.
For difficult-to-collect debts, some collection agencies also negotiate settlements with consumers for less than the consumer owes. Debt collectors may also refer cases to lawyers who file lawsuits against customers who have refused to pay the collection agency.
Agencies That Buy Debt
When the original creditor has determined that it isn’t likely to collect, it will cut its losses by selling that debt to a debt buyer. Creditors package together numerous accounts with similar features and sell them as a group. Debt buyers can choose from packages of accounts that are not that old and that no other collector has worked on yet, accounts that are quite old and that other collectors have failed to collect on, and accounts that fall somewhere in between.
Debt buyers often purc hase these packages through a bidding process, paying on average 4 cents for every $1 of debt face value. In other words, a debt buyer might pay $40 to purchase a delinquent account where the balance owed is $1,000. The older the debt, the less it costs, since it is less likely to be collectable.
The type of debt also influences the price; mortgage debt is worth more, while utility debt is worth less. Debt buyers keep everything they collect; because they have purchased the debt from the original creditor, they don’t send any of the amount collected to that creditor.
Debt collectors get paid when they recover a delinquent debt; the more they recover, the more they earn. Old debt that is past the statute of limitations or is otherwise deemed uncollectable is bought for pennies on the dollar, making collectors big profits. Debt collectors that purchase and collect out of statute debt on the cheap are frowned upon by most consumers and coined “Zombie Debt”
What Debt Collectors Do
Debt collectors use letters, text messages, emails and phone calls to contact delinquent borrowers and try to convince them to repay what they owe. When debt collectors can’t reach the debtor with the contact information provided by the original creditor, they look further, using computer software, skiptracers and in some cases private investigators.
There has been much written about collection agencies and how they communicate with consumers, email, text messaging and social media are new ways debt collectors communicate in their continuing efforts to adapt to consumers preferred ways of communicating. They can also conduct searches for a debtor’s assets, such as bank and brokerage accounts, to determine a debtor’s ability to repay. Collectors may report delinquent debts to credit bureaus to encourage consumers to pay, since delinquent debts can do serious damage to a consumer’s credit score.
A debt collector has to rely on the debtor to pay and cannot take a paycheck or reach into a bank account, even if the routing and account numbers are known, unless a judgment is obtained, meaning that the court orders them to repay a certain amount to a particular creditor. To do this, a collection agency must take the debtor to court before the statute of limitations runs out and win a judgment against him or her. This judgment allows a collector to begin garnishing wages and bank accounts, but the collector must still contact the debtor’s employer and bank to request the money.