Those who have outstanding debts may have been the recipient of calls or letters from debt collectors. Knowing how the process works can help those in debt get some relief and pay off their debts quicker.
What is Debt Collection?
Debt collection is the attempt of a professional debt collection company to recover money owed to a client. Debt collectors are usually third-party companies that aren’t associated with the business that originally provided the loan or service. There are many different types of debt that a consumer can have. Some of these types include:
- Automobile debt
- Medical debt
- Credit card debt
- Student loan debt
- Business debts
- Unpaid utility or personal bills
Collection agencies often begin to come after debt as soon as 120 days after it is past due and are held to legal standards for collecting debts.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act was signed into law in 1978. It prohibits debt collection agencies from posing as law enforcement or an attorney, making up lies about the debt, or making threats to the borrower.
Debt collection agencies are legally required to communicate in the phone call or letter the name of the original creditor, the amount that is owed, and what means a consumer has in disputing the claims. Companies who act outside of the guidelines of the Fair Debt Collection Practices Act may be subject to penalties.