If you are being called by a debt collector who is trying to get you to pay off debts that you have defaulted on, then you might want to know exactly what these debt collectors do and how they operate.
Who is a Debt Collector?
A debt collector is an agency or company whose business it is to try and recover money from people who have defaulted on dept repayment.
Debt collectors are either hired by companies to recover money owed to them by their debtors, or they are companies that buy off these debts from the companies at a fraction of their actual value and then try to recover the full amount for themselves.
What Types of Debts Can a Debt Collector Retrieve?
A debt collector can try and retrieve payments on debts such as overdue phone bills, credit card balances, home mortgages, auto loans, utility bills and even back taxes.
The Debt Collection Process
There are usually 3 stages to the debt collection process.
- First Party Collection
If you have defaulted on your debt, then for the first 6 months of delinquency, it is normally the company’s internal debt collection team that will call you to try and get you to pay off your debt.
This is the best time to try and reach a settlement as there is no middleman involved and the company still wants to maintain a good relationship with you.
- Third-Party Collection
If you still are delinquent on your debts after 6 months, and the company has concluded that you will not pay your debts, then your account is passed onto a third party – an outside agency.
You still are in debt to the company; it’s just that another agency has been called in to try and collect that debt from you. If this agency is successful in retrieving that debt, it will be paid either a set fee or a percentage of the amount you owe the company.
- Debt Buyer
This is the point where the company has completely given up on your being able to pay back the money you owe them, and they sell your delinquent account to another company called a debt buyer. You account will be sold for as little as a few cents, and then it is up to the new company to collect that money from you.
What to Expect When You Have Been Delinquent on Your Debt
If you have been delinquent on your debt, then you can expect debt collectors Sydney to be in touch with you. They can do so by calling you, writing to you and will contact the credit rating agencies with information about the amount of debt you owe.
While there are laws around debt collection practices, you will find that you will be contacted through numerous channels by your debt collectors. They could even call you at your place of work, or even visit you in your home. They can even contact your friends and family and ask after you.
So, while there are thousands of consumer complaints against debt collectors, many of them seem to be getting away with less than savoury practices of debt collection.
Conclusion
Debt collectors do have an unsavoury reputation and are known to be an unscrupulous bunch who will go to almost any lengths to get back a debt. However, there is one thing you as a consumer need to understand.
You borrowed money of your own free will and entered into a legal contract, agreeing to pay off that debt in a given period of time. If you have not been able to do so, then that debt collector has the right to demand their money back.