Unlike the FDCPA that regulate consumer debt collection, there are no U.S. federal laws that regulate third-party commercial debt collection.
Debt collection is oftentimes a painful process that requires a lot of patience and strategic negotiation skills to encourage the debtor to settle his outstanding balance from the service provider to whom he is involved in a contract. Debt collection is the process of accumulating the total amount of money owed by a service subscriber, which is either a business or an individual, through a debt collection agency or department. These institutions are third-party organizations that are composed of lawyers with expertise on consumer law and are trained and skilled when it comes to negotiating with clients to settle their debts.
The process of debt collection begins when the service provider can no longer seek cooperation from the subscriber and decides to turn over the matter to a third-party collections agency. Most companies do not have their own debt collections department primarily because of its high maintenance cost which includes salary for staff, operational expenses like documentations and phone call bills. Ironically, despite the high maintenance cost, the return of investment is also a risk because it is not 100% guaranteed that all consumers will pay their debts. This is exactly the reason why companies choose to hire debt collection agencies as their last resort.
Debt Collection Agencies
A debt collections agency is an institution of attorneys practicing in consumer law that is responsible in making follow ups with clients and informing them about their outstanding balances and provide them with opportunities on how they can settle their account in full. Since it is most likely that the piled-up debt is insurmountable for many, it is impossible for most people to pay their balances in full, so most debt collection agencies would normally settle with the installment basis. Unfortunately, not all who work in debt collections are friendly and oftentimes, their behavior leads to harassment and violation of consumer rights.
The Fair Debt Collections Practices Act protects consumers from probable harassment from the debt collections agency and ensures that the client’s responsibility in paying off his debt is still within his financial capabilities. However, if the law proves that there is indeed negligence on the part of the client and that all negotiations were undertaken by the debt collections agency as well as the service provider involved, the liability goes against the consumer himself. However, there are no laws in the United States that regulate commercial debt collection.
Many countries do not allow the prosecution or litigation of consumers who are not able to pay the debt they owe for the services they have subscribed to. This is part of their consumer protection laws that makes consumers immune to any lawsuit that is brought by inability to pay their outstanding debts. This is basically the reason for collections agencies to become aggressive in their notice letters. However, it is the major responsibility of the collections agency to cope up with the financial capabilities of the client and their preferable terms and schedules of payment. This is the downside of being a service provider, because apart from the potential zero return of investment, it is the liability of the company if it has been proven that there is indeed any harassment that happened between the debt collector and the client.