Some people have never had to deal with a debt collection agency while many have been dealing with them for some time now. I've had the wonderful pleasure to deal with many debt collectors in the past two years such as NCO Financial Systems, Receivables Management Corp., American Recovery Service Inc., Calvary Portfolio, Diversified Adjustment Services, Nationwide Recovery Systems, and RJM Acquisitions. Like any business, they're out to make a profit and my task is to save my client's some money and shrink that PROFIT MARGIN of theirs by re-negotiating a new settlement amount (so you can see why me and these guys clash alot). Below I will list questions from clients that I hope you all can relate to.
Frequently Ask Questions
Xavier, what is a debt collector/agency?
Answer: A debt collector/agency is a business that comes after you for payments of debts owed from a previous account you held. Currently, its three forms of a debt collection business, 1.) An internal department within the original creditor's company (i.e. Verizon Wireless has a collections department), 2.) Third party debt collection agency that works on the behalf of the original creditors for a small fee (i.e. Verizon Wireless gets tired of trying to get you to pay on the debt so they contact a company such as NCO Financial Systems to help assist them for a fee), 3.) Debt buyers purchase the debt at a percentage of its value, then attempt to collect it (this newsletter will focus on this type).
Xavier, how does the debt collector/agency make their money?
Answer: There are many business models out there to use, but I will focus on the most traditional. Hypothetical, you owe Verizon Wireless $1,500.00 that hasn't been paid over a 2-year period, Verizon's countless efforts to collect the payment from you has left them penniless each time. Verizon then reaches out to NCO Financial Systems and offers the debt collection agency to purchase your delinquent account at a 55% discount ($1,500.00 x 0.55 = $825.00 discount for collection agency), Verizon makes aware to the collection agency they've tried for two years to get the account paid off but no luck. NCO Financial Systems purchases the debt for $675.00 then immediate contacts you and say's hey buddy (the first conversation always seem to start out friendly), we have this debt you owed Verizon Wireless for $1,500.00, since then the debt has accrued fees and interest and the current balance is $1,899.59 (how come the numbers always end with a 9 something, there's history behind that 99 number but we can chat about that at a later date, anyhow), the debt collector now offers you this amazing deal (that only last for as long as the length of the conversation) and says we'll settle this debt with you today for $1,300.00. STOP AND CRUNCH THE NUMBERS
ORIGINAL DEBT WAS $1,500.00, THE DEBT HAS INCREASED $399.59 or approximately 27% SINCE BEING WITH NCO FINANCIAL SYSTEMS TO $1,899.59. NOW THEY ARE OFFERING A SETTLEMENT OF $1,300.00 WHICH IS ONLY 13% OFF THE ORIGINAL BALANCE BUT 32% OFF THE NEW BALANCE WITH FEES AND INTEREST. SOUNDS GOOD RIGHT? NOPE, THEY PROBABLY PURCHASED THIS DEBT FOR $675.00 ANDTHEY'RE TURNING AROUND TO CASH OUT ON IT AT $1,300.00, A PROFIT MARGIN OF 93% or $625.00 GAIN ON THE PURCHASE, YIKES!!! LET'S CUT THAT PROFIT MARGIN DOWN TO 40% AND MY CLIENT OFFER $945.00 TO SETTLE, THIS WAY MY CLIENT WALKS AWAY PAYING $555.00 LESS ON THE ORIGINAL BALANCE AND NCO FINANCIAL SYSTEMS WALKS AWAY WITH AN EXTRA $270.00 IN THEIR POCKET...EVERYONE HAPPY NOW, RIGHT?
Probably not and this is when the debt collection agencies becomes less friendly and not responsive to the offer. What's done is done, NCO Financial Systems has already dragged the credit score down by posting this delinquent account on the credit report so we can play the waiting game until it reaches the Statue of Limitations (SOL or Statue of Limitations is the amount of time a particular debt is collectable by anyone, once it reaches this level, usually 7 years or so, no one can come after you about this debt). Now that it has escalated between you and the debt collector, You Need to Know Your Rights!
Xavier, what are my rights?
Answer: Many rights are available to us under the Federal Trade Commission's (FTC) consumer protection agency that enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you. Some of the biggest no no's include:
- Debt collectors cannot contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it. They also cannot contact you at work if they're told (orally or in writing) that you're not allowed to get calls there.
- A debt collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your attorney.
- Debt collectors cannot harass anyone (not sure what person can, but anyhow), they cannot use threats of violence or harm, use obscene or profane language, or repetitively use the phone to annoy someone
- Debt collectors cannot pretend to be anyone else then who they really are, this means falsely claim that they are attorneys or government representatives, falsely represent that they operate or work for a credit reporting company, or misrepresent the amount you owe
- No unfair practices are allowed such as trying to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt - or your state law - allows the charge
No one should have to endure such abuse for anyone and if you feel as though you've been a victim you can report any problems you have with a debt collector to your state Attorney General's office (www.naag.org) and the Federal Trade Commission (www.ftc.gov).
Also, I'm here to help. If you have any questions feel free to give me a call or send an email.