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The Top 10 Collections Agency Tactics That Should Be Avoided at All Costs

A third-party business collection agency can be a powerful partner in recovering outstanding debts and increasing cash flow. However, some collection practices have recently come under scrutiny as strong-arm methods that skirt federal regulations. Aside from being illegal, these tactics can reflect poorly on the business.

The business collections industry is lucrative, not only for the creditor seeking to recover outstanding debts, but for the collections agency, as well. In fact, the pressure to recover money is so great that some agencies resort to underhanded tactics as a means of improving their success rate. Steer clear of business collection agencies that practice these ten questionable tactics.

  1. Calling During Inappropriate Hours. cites an FTC requirement stipulating that a business collection agency is prohibited to call a debtor before 8 a.m. or after 9 p.m. without permission from the debtor; to do otherwise constitutes harassment and can be addressed in a court of law.
  2. Claiming to Represent a Government Agency. Communications disguised as contacts from any government agency are strictly prohibited; debtors can and will check that the source is legitimate.
  3. Threatening Higher Repayments. Collection services that threaten debtors with repayment amounts higher than contractual obligations have committed perjury; lawfully applied APRs are typically exempt from this requirement.
  4. Contacting Third Parties. Agencies are not allowed to contact family, friends, or business associates of debtors unless the communications relate directly to the debtors ability to repay; a notable exception, the insurance industry, can consult professional records such as the Medical Insurance Board.
  5. Attempting Incessant Contact. Not only is this illegal, but constant contacts to collect a debt actually work against the business by creating a sense of defiance; unrealistic contacts can push a debtor to retain legal protection.
  6. Adding Collection Charges. Unless written into the contract, collections agencies are prohibited from adding their own arbitrary collection charges on top of the outstanding debt; collections charges are typically the responsibility of the creditor.
  7. Failing to Disclose Rights. Nationwide Consumer Rights reveals that nondisclosure of debtor rights negates any successful collections activities and exposes the creditors to potential litigation.
  8. Sending Forms That Guise Legality. NCR also reminds businesses that collections agencies that represent themselves as lawyers or legal groups can be held liable.
  9. Ignoring Communications from Legal Representatives. Once a lawyer representing the debtor becomes involved in the process, an additional set of procedures governs subsequent activities.
  10. Non-compliance with FTC Regulations. This blanket coverage requires third-party business collection agencies to verse themselves on consumer protections; the FTC can and will take actions against collections agencies found violating the rights of debtors.

Collecting outstanding debts is a natural part of the credit process. However, using a business collection agency that practices unsavory tactics to recover those debts isnt worth the legal hassles or the potential damage to the reputation of an otherwise compliant organization. Take the time to examine potential partners. Dig deeper than their success rates--examine how they achieve their objectives and if those methods truly compliment the positive business model.


Nationwide Consumer Rights

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