Debt collection or debt recovery method
Debt collection or debt recovery method
Debt recovery is done by collection agencies which pursue debts owed by individuals. They are the agents of creditors. They charge fees for their services from the creditors. There is much type of collective agencies.
- First party agencies: Some companies have departments in their own company to pursue the payments of debts. They are in involved in Debt collection and try to maintain good relations with their customers. They generally do not subject to legislation. They are the part of the first party therefore known as first party agencies. Debtor is the second party. Before passing it to the third party they try to collect debts themselves.
- Third party agencies: These agencies are called third party as they were not a part of the contract originally. They charge a fee for communications. Depending upon the attempts made, age of account and type of debt the fee ranges from 10% to 50%. Sometimes there are criteria- No debt recovery- No fees basis. Some agencies offer ‘soft collection’, in which they send urgent letters to the debtors urging them to pay their debts else a negative credit report or action would be taken against them. If the debtors do not give any response ‘hard collection’ status is resumed for debt collection.