Collections companies are known as Bill Collectors, and their jobs are to extract as much payment from those who are past-due on payment obligations as they can to settle an account or to bring it current.
When people do not pay their credit card companies back within about 150 days, the card company will pass the debt off to a collections company. Other businesses who do their own billing will also sometimes find it necessary to pass off the obligation to the collections company.
A collections agency may be used if an account is past due at all, or if is severely past due and a company’s internal Receivables team has not been successful in collecting after many attempts.
In long-standing debt situations,, the collections company may give the creditor a payment of about 10% of the outstanding amount, effectively purchasing the ability to collect most of the past-due balance for themselves, if they can get it.
Debt collectors are often willing to settle for about 30% of the total amount owed. If the bill collectors do their jobs, and a person isn’t bankrupt, the company will make significantly more on the purchased debt than what they paid for it. Outstanding loans, purchase orders, and contracts that have not been paid may also be handed off to collections agencies.
Debt collections agencies are required to observe the Fair Debt Collection Practices Act, which is designed to keep things honest and professional in a business where emotions sometimes get involved.
Collections agencies can be flexible and helpful when it comes to making sure things don’t get too out of hand for debtors, if the debtors are willing to communicate with them, letting them know what they can expect, or what is not feasible.
Sometimes it is possible to have a payment-for-deletion agreement put in writing, where a collections agency is willing to communicate with the credit reporting bureau to have a particular debt record wiped from a person’s credit report history if the person is wiling to pay in full.