subject: Introduction To Debt Collection: Part One [print this page] Debt collectors are separated into third party and in house collectors. In house collectors work directly for creditors. Oftentimes, creditors will utilize a company name, address and phone number that is separate to fabricate the impression of an "outside" agency. This is due to the theory that debtors will take communications from a separate company more seriously. In reality, in house collectors work for the internal collection departments of large, usually financially based creditors such as credit card companies, mortgage companies, and health care providers.
On the other hand, the majority of collections activity is performed and completed by third party collectors, who are employed by an agency that is separate from the original creditors. Third party debt collection companies are "hired out" and work on behalf of a number of lenders, businesses, and commercial companies. Third party debt collection companies also purchase old debts as their own from original creditors.
Due to the fact that they comprise the overwhelming majority of collection agents, this group of articles will focus mainly on third party collection agencies and their debt collectors. Third party collection agencies are either hired, or work on a contingency basis, where they receive a percentage of the amount that they collect. Individual collectors are typically paid with a lower base salary plus commission.
As was mentioned before, some third party collection agencies also buy large amounts of written off "bad debts" for a small percentage of the face value. For example, if a debtor owes five hundred dollars, an agency may pay only 1% - 5% of this total. After a debt is sold, the debtor now owes the entire amount to the agency that purchased it.
The reason the agency is able to purchase the debt for so little is because written off debt will be very dated, and the chances of recovery substantially decrease with time. Any cash that the third party collection agency makes off of the purchase price is their profit.
by: Mallory Megan
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