Consumer loans consist of auto, boat, credit cards and signature loans. If you have loans of these type, and they fall past due, they could go to the consumer collection department, which is responsible for the collection of overdue consumer loans.
Function
Consumer collections can consist of a department within the original lender's facility. This would be an in-house collection department, which will send letters and make phone calls when you are behind on your consumer loans.
Significance
When an in-house collection department is unable to collect on your account, it will forward your account to a third-party debt collector, also known as a collection agency, which continues with collection efforts.
Considerations
Collection agencies will begin legal action if they have tried unsuccessfully to get you to pay your account using the usual methods of letters and phone calls.
Warning
A third party debt collector could get a judgment against you and garnishee your wages. The money taken out of your paycheck would be applied against your past-due debt.
Prevention/Solution
Collection agencies must abide by the laws outlined in the Fair Debt Collection Practices Act, (FDCPA). This is a law put into effect by Congress that governs the activities of third-party debt collectors. In-house collection departments are not bound by these laws, but most comply with them.
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