How a Credit Card Debt Collection Agency Works

A credit card debt collection agency collects individuals' debts on behalf of credit card companies. A collection agency is not a division within the credit card company. It is its own business comprised of collectors who work around the clock to collect unpaid debt.

How These Companies Make Money

A collection agency makes a deal with the credit card company to receive a portion of what it collects from each delinquent account. For example, if the agency is able to get a debtor to pay $5,000 of its debt, the collection agency may receive around 10 to 20 percent of the total amount collected (in this case, between $500 and $1,000).

A Collection Agency’s Tactics

A collection agency comes on strong to collect any debt it can. It calls the debtor repeatedly and also sends letters or emails. An agency representative may even visit your home or workplace. The company persistently attempts to persuade each debtor to pay his or her outstanding balance.

What a Notice Looks Like

A letter from a credit card debt collection agency will ask (and sometimes insist) that a debtor make a payment. The letter will state that the debtor has the right to dispute the debt if he or she believes it to be incorrect or out-of-date.

The Phone Call

If you fail to respond to the initial letter, that’s when a collection agency begins to apply more pressure. It’ll start calling or emailing you; however, the law prohibits these agencies from calling debtors during a time that may be “inconvenient” (e.g., early in the morning or late at night). The debt collectors are told not to take “no” for an answer and will try to get the money any way they can-through guilt, pressure or perseverance. By law, however, debt collectors cannot verbally threaten or harass debtors in any way. They cannot threaten to take the debtor to court or use foul language when speaking with you.

How They Affect Your Credit Score

Having a collection agency become involved in your financial affairs is never good. As if having credit card debt isn’t stressful enough, receiving constant calls, emails and letters asking for prompt payments can make anyone’s head spin. The damage, however, does not stop there. The involvement of a collection agency in one of your accounts will show up on your credit report and thus significantly lower your score. If you pay off your outstanding debt, you may negotiate with the agency to have its involvement removed from your credit report. This is a time-consuming and often costly undertaking, however.

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