These days, there are many different types of companies that may be contacting you about your unpaid accounts. After you speak to one, another one calls and then another. In dealing with everyone, you must wonder, why do I keep talking to new people, why do I have to repeat my story, why won’t somebody help me? In order to understand the answers to these and other questions, you must understand who you are dealing with and how they operate.
Let’s start at the beginning. You became personally obligated to a Finance Company (“FC”) who loaned you money and for whatever reason, the money was not paid back in full. They may have contacted you directly, but demanded full payment and would not negotiate. Obviously, you would have paid them if you could, so nothing gets resolved. From there, the FC sends your account to a Collection Agency (“CA”).
A CA is exactly what the name says it is, an agent for the FC for which they try to collect the money due. The CA does not have title to the account and are simply a representative. They are issued the account and given a time period for which they have the opportunity to collect the money. They are granted limited authority to settle the matter without the FC’s approval. If the CA wants to settle for an amount below their authority, they must contact the FC for approval. The CA has limited time to collect and they only get paid a percentage of what they collect. So, their motivation is to get you to pay as much as possible in a short period of time. It is a race against the clock! CAs don’t usually have backup documentation and are simply attempting to sway you to paying them so they can collect a commission. If the account does not get settled with that CA, then it will usually go to another CA with the process starting all over again.
At some point, your account may end up with a Debt Buyer (“DB”). This is a good thing, because there is more settlement flexibility and it is not likely to be sold again soon, if at all. A DB purchases your account and holds title to it. Therefore, they have total authority to settle the matter for any amount and over any time period. DBs generally have access to all of the backup information and your financial standing. They can be reasonable and allow payments over a longer period of time, since they aren’t on a time limit. When the account is purchased, the DB pays based on a discount to what is due. While they pay less than the amount owing, that does not change your obligation on the debt. You are still liable for the full amount, but a DB should be more understanding in how they structure the payback. A DB wants to help you honor the obligation and clear up your credit obligation.
As you can see, there are some distinct differences in the ways Collection Agencies and Debt Buyers operate. Hopefully, should you encounter them in the future, this will give you more insight about handling the situation.