Definition
A debt collector is any individual or entity that pursues repayment of delinquent or defaulted financial obligations from a debtor.
Analysis
A debt collector may work for an internal collections department of a creditor. This is common for credit accounts that are 1 to 6 months delinquent.
Older debts are generally charged-off as bad debts, and they may be purchased by an outside collection agency or an attorney. Outside debt collectors must follow certain guidelines and rules established by the Fair Debt Collection Practices Act (FDCPA). Despite substantial fines and other penalties for breaking rules of the FDCPA, most collection agencies routinely violate certain provisions of the Act.
Debt collectors frequently purchase large portfolios of consumer debt, which may represent hundreds or thousands of debtors owing money to a single creditor. They will contact debtors through a variety of methods, including through letters and frequent telephone calls.
Attempts to collect on a debt must be disclosed to the debtor at the point of contact. Failure to do so by the debt collector may be a violation of federal law.
Debt collectors may buy consumer debt accounts for a fraction of the balance, often 20-30% of the total. After many collection attempts, any accounts still outstanding may be turned over for legal action, or they may be resold to another debt collector.
In order to increase the success rate of collection attempts, debt collectors may employ the services of a skip tracer. This can increase the total contacts that a debt collector has with the debtor, and provide more opportunities to encourage repayment of the debt.
