Professional debt collection – an insight
A professional debt collection agency is a business which is meant for debt collection or it’s an entity which specializes in debt collection. Debt collection professionals pursue payments of debts either by individuals or by business. Creditors use these debt collection professionals as their agents. Debt collection professionals are paid fee for debt collection or sometimes they are paid the percentage of the total amount collected.
We can find different types of debt collection agencies. Mainly there are two types first-party agency and third party agency. If the debt collectors are subsidiaries of the original company then it is called first-party agency. If the original company has given contract of debt collection to a separate company then these collectors are known as third-party agency. They collect the debt on behalf of original company. This will be decided by the rules and regulations of the government of that particular country.
Debt collection can be seen even in ancient civilizations. In olden days when people are unable to pay their debts to the creditor then the whole family has to become slave for the creditor. The amount to be paid was deciding how long they should be slaves to the creditor. If the amount is huge then slavery will be carried even to next generations. So the whole family and subsequent generation of that family use to become the slaves for creditors.
First –party Collection agency
First – party agencies are the part of Creditor Company. These subsidiaries of the creditor are involved in the collection process at earlier stages. If first-party agencies are successful in collecting the debt it is beneficial to the creditor.
They are named so because they come under the part first –party for the creditors. For the creditor the second party is debtor. First – party agency tries to collect the debt initially. If it fails to the job then the creditor calls for third-party agency. Once the creditor sells off the collection to third-party agency he loses most of its value.
Third –party collection agency
If the debt collection agency is not a part of the creditor company then it is called third – party collection agency. There will be a service level agreement between the creditor and collection agency. The accounts from which the first – party collection agency is unsuccessful to collect payment are assigned to third – party collection agency. Once they collect the debts from accounts they will take a percentage of debts from the creditor. This is also known as potential fee which is received after the successful collection. Collection agency is paid only if the debtor makes payment. If they are unsuccessful to collect the debt they are not paid. The percentage which the agency receives rages from 10%- 50% depending on the account.
Professional collection agencies will make strategies to accelerate the payments. They will also help the clients to recover them from bad economics.
Companies give contract of these problematic accounts to collection agencies on a service level agreement and get the payment without wasting time, energy and more money.