Biggest Myths About Debt Collection

The myths surrounding debt collection are widespread. Unfortunately, it can be challenging to tell what is true since there is a lot of false information. The Debt Collection Hub is here to help you debunk some common debt collection myths.

The following are some of the most common myths about collection agencies and why they are not true:


Myth 1: Debt collectors constantly harass people who don't pay their debts.

Fact: Collection agencies undergo a lot of training to comply with the FTC's Fair Debt Collection Practice Act. The primary purpose of the Fair Debt Collection Practice Act is to protect consumers from unfair practices and to provide a set of standards that debt collectors must follow. In addition, efficient collection agencies will employ methods to assist debtors in paying their debt.

Myth 2: Debt collectors should be ignored.

Fact: Ignoring a collector's call will not stop the collection process. On the contrary, ignoring a debt collector will often only force the agency to employ additional and more aggressive measures.

Reputable collection agencies train their agents to offer flexible repayment plans that fit your budget. Keeping an open dialogue could help you avoid more collection actions.

Myth 3: Debt collectors drive people into bankruptcy.

Fact: It would not make sense for a debt collector to encourage a consumer to declare bankruptcy. Most people who file for bankruptcy have their financial obligations wiped clean - and creditors and debt collectors will receive very little or nothing from their debts.

Myth 4: Collection agencies are scams and not legitimate companies.

Fact: The vast majority of collection agencies adhere very strictly to compliance and regulations. It is common for collection agencies to partner with organizations such as ACA International to ensure high ethical standards and compliance with federal and state law. A collection agency that follows these protocols can become one of the country's most ethical and compliance-oriented businesses.

Myth 5: Collection agencies can't sue a debtor in court.

Fact: While only a small percentage of collection accounts end up in litigation, it can be necessary in some cases. Collection agencies often partner with lawyers to handle these cases. In addition, some companies have in-house legal departments that manage lawsuits. In most cases, collection agencies do not need a judgment to collect.

Myth 6: Collection agencies are risky and expensive.

Fact: In practice, collection agencies typically charge a percentage of the money collected, which usually ranges from 20% to 50%, depending on the type and age of the debt. However, lawyers typically charge upfront costs, requiring payment regardless of success or failure. By contrast, the risk to a collection agency's client is very low since most agencies cover all out-of-pocket costs and work on a no-collection-no-fee basis.

This means that if the collection agency is unsuccessful, you will not pay anything. As a result, good collection agencies are highly incentivized to collect quickly and efficiently, which works well for the client. It offers freedom from throwing good money after bad and enables clients to test a collection agency with minimal risk.

No business model is perfect, and collecting debt from all kinds of people is very difficult. Of course, it is possible for the reputation never to go away completely, but that might not be a bad thing at all. It keeps collection agencies on their toes, striving to improve their practices and achieve better results.
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