Advantages and disadvantages of using a debt collection agency (2024)

FAQs

Advantages and disadvantages of using a debt collection agency? ›

Not necessarily. It's not always wise to pay a debt collection agency, even though that may be your first instinct. Depending on your circ*mstances, doing so may only worsen your financial situation and compound your problems.

Not necessarily. It's not always wise to pay a debt collection agency, even though that may be your first instinct. Depending on your circ*mstances, doing so may only worsen your financial situation and compound your problems.

Unlike the typical business owner who has to deal with several different things at any given time, debt collection agencies only have one central goal – to recover debts. This means that they are able to dedicate all of their time, energy, and resources on contacting debtors and collecting funds owed to your company.

Generally, paying the original creditor rather than a debt collector is better. The creditor has more discretion and flexibility in negotiating payment terms with you. And because that company might see you as a former and possibly future customer, it might be more willing to offer you a deal.

Yes, if a debt collector has contacted you about a legitimate debt, you are legally obligated to pay it. However, it's essential first to verify that the debt is yours and the amount is correct.

If a debt collector continues to harass, lie or threaten you, it may be time to hire a lawyer for a small fee to send a certified letter asking them to stop contacting you. You can also report them to the Federal Trade Commission.

Debt collectors are limited on when they can call you — typically, between 8 a.m. and 9 p.m. They are not allowed to call you at work. They can't lie or harass you. Debt collectors can't make you pay more than you owe or threaten you with arrest, jail time, property liens or wage garnishment if you don't pay.

Don't provide personal or sensitive financial information

Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.

You might get sued.

A creditor with a money judgment can garnish a debtor's wages, go after the funds in a debtor's bank account, and seize property not protected by an exemption.

When should you use a collection agency? ›

Debt collectors include collection agencies or lawyers who collect debts as part of their business. There are also companies that buy past-due debts from creditors or other businesses and then try to collect them. These debt collectors are also called debt collection agencies, debt collection companies, or debt buyers.

Yes, it is generally beneficial to pay off collections. Settling collection accounts can improve your credit score over time and prevent further negative consequences like legal actions or added fees. Consult with a financial or legal professional for advice on individual circ*mstances.

If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

If the debt collector won't negotiate, your best option would be to contact the initial creditor that sent your debt to the collector. That creditor might be willing to compromise with you. You could also suggest to the debt collector that if he or she refuses to settle, you will be forced to file for bankruptcy.

Settling your past-due debt may help your credit, especially if your creditor still holds the account. In that case, contact your creditor immediately to make payment arrangements and avoid further collection efforts.

Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take. They also cannot make repeated calls over a short period to annoy or harass you.

Debt-collection cases are also a rising share of civil court cases, according to the same report. According to a Consumer Financial Protection Bureau report, you have a higher chance of being sued in a debt-collection lawsuit if: The statute of limitations hasn't expired or the debt is new.

Ignoring or avoiding the debt collector may cause the debt collector to use other methods to try to collect the debt, including a lawsuit against you. If you are unable to come to an agreement with a debt collector, you may want to contact an attorney who can provide you with legal advice about your situation.