How a Collection Agency Works

If you’re contacted by a collection agency, the experience can be both stressful and confusing. It’s important to understand your rights and devise a strategy before speaking with creditors, as the process can damage credit and lead to legal judgments against you.

An incassobureau is a company that works on behalf of lenders or creditors to recover funds that are past due or from accounts in default. Lenders or creditors hire these companies after unsuccessfully trying to collect the debt themselves, which can be a time-consuming and expensive task. Collection agencies typically charge a fee for their services, which is a percentage of the debt they collect.

Creditors typically send debt to collections after it’s been past due for 60 to 180 days. Accounts that are more than 120 days overdue are unlikely to be repaid, which is why many creditors turn to collection agencies.

Debt Solutions Unveiled: How a Collection Agency Can Work for You

Once a debt goes into collections, it’s typically reported to the three major consumer reporting agencies, Equifax, Experian and TransUnion. It’s also possible that the debt collector may report to a state’s department of commerce or other regulatory body, depending on your specific situation.

If you receive a notice that a debt has been sent to collections, the original creditor has 30 days from when they receive your written dispute to validate or revalidate the debt. This is required under the Fair Debt Collection Practices Act (FDCPA). If they can’t verify the debt within 30 days, they must stop contacting you about it. They must also provide you with a debt validation letter within five days of initial contact that lists how much is owed, the name and address of the original creditor and other details.