When Does a Collection Agency Get Involved?

Creditors will always try to collect what is owed to them by using in-house methods first. They will send letters or billing statements, cut off service and make phone calls. They want to get their money while maintaining a good relationship with their customer. However, when their efforts fail or they encounter hostility from the customer, creditors often turn to collection agencies to recoup their money for them.

Initial Process

When a creditor decides to use a collection agency for a debt, they contact the agency, send information related to the debt and sign a contract that authorizes the agency to act on their behalf and guarantees the collection agency a fee if they recoup any monies. This fee is often a commission based on a percentage of the amount recovered. Sometimes a creditor will just sell any overdue debts directly to a collection agency for a partial amount of the debt.

Timeframe

It is up to the original creditor to determine when he wants to involve a collection agency. Most collection agencies recommend a creditor to wait for 60 to 90 days before hiring them. The creditor should try first, but the older the debt is, the harder it is to collect.

Collection Period

According to the site VendorSeek, it takes an average of 90 days from the point of hire for a collection agency to recover monies on a debt. Some agencies, such as Centralized Business Solutions Company, claim they recover money in an average of 60 days.

Debt Verification Period

Once a potential debtor is contacted by a collection agency, he has 30 days to respond to the agency and request a verification of the debt. In order to legally collect on a debt, the collection agency must have the full name, address and phone number of the debtor (or the Social Security number), the total amount due, when it was owed and any proof of the debt. This proof includes contracts, receipt of merchandise, bills of sale and any cancelled checks relating to the debt. If the collection agency cannot provide proof that the debt is owed by the person they have contacted, the debt is not valid and the collection agency must cease their collection attempts.