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Collections

What Is Collection?

Collection is the process by which creditors attempt to get payment from nonpaying debtors. This process can be performed by the creditor or by a collection agency that the creditor has hired. A collection agency is a company that aggressively pursues debtors to collect money for the creditor.

Collecting Money Owed to Me

There are several debt collection practices that you can use to try to persuade your debtor to pay the debt:

Reminder invoice - Send the debtor another invoice to remind them how much the debt is and that you still want the debt paid.
Formal demand notice - Send the debtor a letter stating that you demand timely payment.
Call or visit the debtor - If the laws of the debtor's state allow it, personally call or visit the debtor and ask him or her to pay the overdue bill.
Hire a collection agency - Ask a collection agency to persuade the debtor to pay. A collection agency typically takes a percentage of the money due as compensation. Should you choose to hire a collection agency, be sure to check the agency's credibility with the Better Business Bureau and the Attorney General's Office.

What Can a Collection Agency Legally Do to Collect Payments?

Collection agencies tend to use aggressive tactics to collect money owed. These tactics, however, must not violate the Fair Debt Collection Practices Act (FDCPA). This act limits what actions a collection agency can take in its effort to collect payments.

For example, a collection agency cannot:

Use threats of violence or harm
Contact any third party about the debt owed
Use obscene language
Use the phone to annoy or irritate someone
Falsely misrepresent themselves as attorneys, government officials, or any other entity
Make false or misleading statements
Declare that they will take unlawful action if payment is not made

There are also several things a collection agency must do once it has contacted a debtor. The collection agency must disclose:

The amount of the debt
The name of the creditor
The timeframe in which the debtor can dispute the amount owed