A collections agent is an entity, legally licensed to recover default payments and “charge-off” debts on behalf of the original creditor. As the charge-off debts are marked as uncollectible in lender’s financial system, collections agent will bring profit to creditor’s institution after the successful collection of delinquent amounts. Usually such agent represents a registered DCA (Debt Collection Agency), but can act under creditor’s company name as well. In the second case it denotes that the collection agent is part of lender’s corporation. A recovery agent strives to organise a diplomatic approach towards the debtor, in order to preserve business relations between the first party (creditor) and second party (debtor). A collections agent can operate on local or/and international level; his actions are in compliance with the strict code of local and international legal practice and laws in order not to violate debtor’s rights as a consumer. The debt recovery process, which is carried out by a collection agent, consist of different negotiation methods and recovery tools, leading to prosperous and full debt collection.
Collections agent- varieties and profile specifications
A collections agent can be sub-divided into consumer and business recovery agent. The first chases consumer debts, where the debtor is an individual; and the second type recovers corporate debts, also known as “business-to-business”, where the subject of debt and the creditor are both business organisations.
A recovery agent can also be classified into different types, according to the area of activity and expertise. If the recovery agent operates under creditor’s trading name and is part of his company, he will be marked as “first-party” collections agent. Such entities start the collection process earlier, as in this case there is no data transfer process.
A recovery operative, who works for licensed DCAs is known as third-party collections agent. This type recovers delinquent payments on behalf of the original creditor for a fixed interest (commission fee). Such agents use integrated APIs (Application Programming Interface), which exchange debtors default profiles’ information between the collection agency and the initial lender.
A collections agent can be a debt buyer as well. He can be part of a debt collection recovery agency or operate on a private level. His main target is purchase of bad debt profiles from the original creditor in exchange of a portion payment to the lender. From then on such agent can decide to start the recovery process as the new creditor or re-sell the bought debts to another debt buyer.
If a legal debt recovery solicitor specialises only in collection of bad debt default payments, he is also considered as a recovery agent. Such attorneys and legal representatives have wider range of authorised actions than a standard debt recovery agent. They can seize debtor’s belongings or property, using force, and can also transfer the whole debt collection individual case to legal court. A debt recovery solicitor sends different official letters of demand and letters before action. They can also negotiate with the debtor, using in-house visits, and settle a convenient payment procedure for paying the debt amount in full.
First-party, third-party and debt purchase agents use the same methods of contact and collection, when it comes to the debt recovery process. They all utilise different pre-legal, legal and court proceedings, including phone calls, written and face-to-face communication, emails, official letters (reminding and informative), perform personal visits to debtor’s property, etc. They can also offer payment plans to the consumer and sell part of his belongings at auction on order to resolve the debt issue. But apart from legal attorney collections agent, standard debt recovery representatives cannot seize a property or personal possessions forcefully. Apart from the types of agents mentioned above, a debt solicitor collections agent assists only during the legal part of the collection proceedings.
Law regulations for collections agent
Generally third- and first-party collection agents are regulated by the same national, state and local acts. There are, however, some exceptions. The FDCPA (Fair Debt Collection Practices Act valid for U.S.), for example, specifies a difference between these two types of recovery agents. According to this act, they both have the legal right to collect delinquent amounts, but a first-party collections agent is prohibited from charging the debtor a DCA’s interest fee, if the first-party recovery agent acts under creditor’s company trading name.
There are different regulations controlling collections agent’s actions as a whole. Most of these laws are valid for all types of recovery agents, as they protect debtor’s rights as a consumer. Such acts are: the Federal Trade Commission for U.S., the Office of Fair Trading for UK & Wales, Office of Consumer Affairs and the Consumer Protection BC for Canada, Solicitors Regulations Authority for UK & Wales, Bankruptcy Abuse Prevention for the United States and Consumer Protection Act (UK & Wales), European Collectors Association, Solicitors Order 1976 (for Northern Ireland), European Small Claims Procedure and European Collectors Association (for international debt collection agent), and many others.
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