Collection agencies purchase accounts from creditors whose customers will not submit payments voluntarily and who have neither the time nor the resources to pursue the debtors themselves. Because collection agencies purchase bad debts in large batches, each account may or may not contain complete location information on the consumer in question. A collection agency must be able to locate you in order to successfully collect on the account.
Facts
The two most common debt recovery methods that collection agencies employ are debt collection letters and telephone calls. Without your address or telephone number, a collection agency has no way to inform you of your debt and collect on the account. Debt collectors often employ skip-tracing tactics to locate missing debtors. Collection agencies skip trace by searching through public records, utility records and telephone listings in order to find you. Some collection agencies even employ private investigators to track down debtors.
Features
As soon as a creditor sells your debt to a collection agency, the company has permissible purpose under the Fair Credit Reporting Act to access your credit report without your permission. Your creditors regularly update your personal information with the credit bureaus. Your credit report lists all of the addresses that creditors have reported for you over the past five years. A collection agency will use your past addresses to supplement its investigation.
Considerations
In addition to pulling a copy of your credit report, the collection agency will also insert a trade line on your credit report noting that you owe a collection account. Many collection agencies wait to insert a trade line since this allows them to use the threat of potential credit damage to coerce debtors into making a payment. If the company cannot locate you, however, it will insert its trade line in the hope that you will see the account and contact the company of your own accord.
Warning
Depending on how much you owe, the collection agency may simply file a lawsuit against you rather than expending effort attempting to contact you. A creditor doesn't have to know your current location in order to sue you. It can serve notification of the lawsuit to your last known address. New York's Neighborhood Economic Development Advocacy Project notes that a collection agency is more likely to file a lawsuit if the debt you owe exceeds $1,000.
Your failure to appear in court will result in the court levying a default judgment against you. Because judgments allow a collection agency a wider ranger of collection options and are renewable for up to 20 years in some states, they give the collection agency ample time to locate you and seize the debt you owe through liens or garnishment.
Effects
Not all collection agencies will expend significant time and resources searching for you. Even those that do will eventually write off your debt as a business loss. When this occurs, the collection agency will sell your account to yet another collection agency and the process of locating you begins anew.
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