Consumer Debt Collection

Consumer debt collection refers to collecting money that a creditor loaned a client for personal use. This is usually in the form of unsecured credit such as personal bank loans, credit card balances or revolving charge accounts at department stores. When repeated statements, notices and telephone calls do not result in any payment coming forward, then quite often the only recourse a company has is to turn the account over to a collection agency.

When Should You Use Consumer Debt Collection?

Many companies are reluctant to pass the accounts over to a consumer collection service because they feel that they will have to pay high fees and if they don't get the money back, this is an added expense. The fact is that most collection agencies do not get paid until you do. They charge a contingency fee on the amount of money they collect. The fee is a percentage of this amount and depends on the amount of money involved. It also depends on the age of the account

Accounts that are new and no more than 3 or 4 months overdue are easier to collect. Therefore these carry the lowest percentage as a fee – usually about 20%. They do need to have a minimum balance of $1000. For accounts that are a year old, the fee rises to 30% and accounts for less than $500 are usually charged 40%. If there are accounts dealing with debtors outside the United States, the fee is about 45%. Accounts higher than $10,000 usually receive a discount because of the higher sums of money involved. So you see that using a consumer debt collection agency to help you recover the debt will give you more than half the money back – which is more than you are managing to retrieve on your own.

Some companies also struggle with when they should resort to using a collection agency to help them recoup their losses. A customer that constantly requests documentation regarding the account is only using a delay tactic and you are expending resources sending out the proper paperwork. Once an account is opened, the due dates are always printed on the application, so the customer knows how long he/she has before making payment. Experts recommend that any account that is 120 days overdue should be passed over to a consumer collection service. This account is fresh and the agents can get started on the collection process right away.

Other delay tactics that debtors often use is to say that they will make payment by a specific date – but that date never arrives. They might promise to take care of the problem and set up a payment schedule, but they don't adhere to it. You don't realize that a payment hasn't been made until you start your accounting process at the end of the month or whatever time you have for sending out bills in your company. Instead of continuing to stress yourself out about how to get back the money a debtor owes your company, get a consumer debt collection service to help you out.