Presentation on theme: "International debt law A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate."— Presentation transcript:
International debt law A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed.debtscreditors
There are many types of collection agencies. First-party agencies are oftentimes subsidiaries of the original company the debt is owed to. Third- party agencies are separate companies contracted by a company to collect debts on their behalf for a fee.
Debt buyers purchase the debt at a percentage of its value, then attempt to collect it. Each country has its own rules and regulations regarding them. Debt buyers
First-party agencies Some collection agencies are departments or subsidiaries of the company that owns the original debt. First-party agencies typically get involved earlier in the debt collection process and have a greater incentive to try to maintain a constructive customer relationship.
Because they are a part of the original creditor, first-party agencies may not be subject to legislation which governs third-party collection agencies.
These agencies are called "first- party" because they are part of the first party to the contract (i.e. the creditor). The second party is the consumer (or debtor).
Typically, first-party agencies try to collect debts for several months before passing it to a third-party agency or selling the debt and writing off most of its value.
Third party agencies The term collection agency is usually applied to third-party agencies, called such because they were not a party to the original contract. The creditor assigns accounts directly to such an agency on a contingency- fee basis, which usually initially costs nothing to the creditor or merchant, except for the cost of communications.
This however is dependent on the individual service level agreement (SLA) that exists between the creditor and the collection agency. The agency takes a percentage of debts successfully collected; sometimes known in the industry as the "Pot Fee" or potential fee upon successful collection.service level agreement
This does not necessarily have to be upon collection of the full balance; very often this fee must be paid by the creditor if they cancel collection efforts before the debt is collected. The collection agency makes money only if money is collected from the debtor (often known as a "No Collection - No Fee" basis).
Depending on the type of debt, the age of the account and how many attempts have already been made to collect on it, the fee could range from 10% to 50% (though more typically the fee is 25% to 40%)
Debtors The person who owes the bill or debt is the debtor. Debtors may fail to pay (default) for various reasons: because of a lack of financial planning or over commitment on their part; due to an unforeseen eventuality such as the loss of a job or health problems; dispute or disagreement over the debt or what is being billed for; or dishonesty on the part of either the creditor or the debtor. The debtor may be either a person or an entity such as a company.loss ofa jobdishonesty
Sale of debts An increasing number of collection agencies, sometimes referred to as "debt buyers", purchase debts from creditors for a percentage of the value of the debt and pursue the debtor for the full balance, sometimes plus "interest". This prevents a debtor from merely defaulting or forgetting a debt.debt buyersdebtor
Collection account Collection account is the term used to describe a person's loan or debt which has been submitted to a collection agency through a creditor. The term is not used on debts with only original creditorsloandebt
Credit record Defaulted debts are placed by an alleged debt owner on a person's credit record, and usually remain for several years, particularly if the debt has been referred to collection agencies or subject to court judgments. This may not necessarily be properly authenticated or checked to be accuratecredit record