Definition
Collections refers to any attempt to receive payment on a delinquent account or debt in default.
Analysis
Collections can consist of two main distinctions. Delinquent accounts are handled by a creditor’s internal collections department.
A defaulted debt that has been charged-off as a bad debt is sold to an outside debt collector. Debt collectors may simply be attorneys that buy debt and attempt to collect. Most collections activity is handled by higher volume collection agencies.
Collections activity routinely consists of:
- telephone calls
- to the account holder
- to the consumer’s employer
- to the consumer’s neighbors or family
- printed notations on statements
- letters to the account holder
- printed and verbal threats of legal action
It is important to note that the above collections activities are highly restricted yet loosely regulated by collection law. Internal collections departments are not necessarily held to restrictions under the Fair Debt Collection Practices Act, which was written with outside debt collectors in mind.
Most outside debt collectors routinely violate certain provisions of the Fair Debt Collections Practice Act as well as other credit reporting guidelines.
