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Debt collection is the process of pursuing payments of
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
s owed by individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector. Most collection agencies operate as agents of
creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of people who have been invited by a host A host is ...

creditor
s and collect debts for a fee or percentage of the total amount owed.


History

Debt collection has been around as long as there has been debt and is older than the history of money itself, as it existed within earlier systems based on
barter In trade Trade involves the transfer of goods from one person or entity to another, often in exchange for money. Economists refer to a system A system is a group of Interaction, interacting or interrelated elements that act according ...

barter
ing. Debt collection goes back to the
ancient civilization  A civilization (or civilisation) is a complex society that is characterized by Urban area, urban development, social stratification, a form of government, and Symbol, symbolic systems of communication (such as writing system, writing). ...
s, starting in
Sumer Sumer ()The name is from Akkadian language, Akkadian '; Sumerian language, Sumerian ''kig̃ir'', written and ,approximately "land of the civilized kings" or "native land". means "native, local", iĝir NATIVE (7x: Old Babylonian)from ''The ...

Sumer
in 3000 BC. In these civilizations if a debt was owed that could not be paid back, the debtor and the debtor's spouse, children or servants were forced into "
debt slavery Debt bondage, also known as debt slavery, bonded labour, or peon Peon (English language, English , from the Spanish language, Spanish ''wikt:peón#Spanish, peón'' ) usually refers to a person subject to peonage: any form of wage labor in whi ...
", until the creditor recouped losses via their physical labor. Under
Babylonian Law
Babylonian Law
, strict guidelines governed the repayment of debts, including several basic debtor protections. In some societies debts would be carried over into subsequent generations and debt slavery would continue. However, some early societies provided for periodic
debt forgivenessDebt relief or debt cancellation is the partial or total forgiveness of debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or ser ...
such as a
jubilee A jubilee is a particular anniversary An anniversary is the date on which an event took place or an institution was founded in a previous year, and may also refer to the commemoration or celebration of that event. For example, the first ev ...
s or would set a time limit on a debt. Both the
Bible The Bible (from Koine Greek Koine Greek (, , Greek approximately ;. , , , lit. "Common Greek"), also known as Alexandrian dialect, common Attic, Hellenistic or Biblical Greek, was the koiné language, common supra-regional form of Gree ...

Bible
and
Quran The Quran (, ; ar, القرآن , "the recitation"), also romanized Qur'an or Koran, is the central religious text Religious texts, also known as scripture, scriptures, holy writ, or holy books, are the texts which various religious t ...

Quran
issue stern restrictions regarding how much interest to charge on a loan. The
Abrahamic religions The Abrahamic religions, also referred to collectively as the world of Abrahamism and Semitic religions, are a group of Semitic Semitic most commonly refers to the Semitic languages, a name used since the 1770s to refer to the language family ...

Abrahamic religions
discouraged lending and prohibited creditors from collecting interest on debts owed. By the
Middle Ages In the history of Europe The history of Europe concerns itself with the discovery and collection, the study, organization and presentation and the interpretation of past events and affairs of the people of Europe since the beginning of ...
, laws came into being to deal specifically with debtors. If creditors were unable to collect a debt, they could take the debtor to court and obtain a judgment against the debtor. This resulted in either the
bailiff A bailiff (from Middle English Middle English (abbreviated to ME) was a form of the English language spoken after the Norman conquest of England, Norman conquest (1066) until the late 15th century. The English language underwent distinct va ...
of the court going to the house of debtor and collecting goods in lieu of the debt, or the debtor being remitted to
debtor’s prison A debtors' prison is a prison for Natural person, people who are unable to pay debt. Through the mid-19th century, debtors' prisons (usually similar in form to locked workhouses) were a common way to deal with unpaid debt in Western Europe.Cory, ...
until the debtor's family could pay off the debt or until the creditor forgave it. In occupied territories of the
Roman Empire The Roman Empire ( la, Imperium Rōmānum ; grc-gre, Βασιλεία τῶν Ῥωμαίων, Basileía tôn Rhōmaíōn) was the post-Republican Republican can refer to: Political ideology * An advocate of a republic, a type of governme ...

Roman Empire
, tax collectors were frequently associated with extortion, greed, and abuse of power. In medieval England, a catchpole, formerly a freelance tax collector, was a legal official, working for the
bailiff A bailiff (from Middle English Middle English (abbreviated to ME) was a form of the English language spoken after the Norman conquest of England, Norman conquest (1066) until the late 15th century. The English language underwent distinct va ...
, responsible for collecting debts, using often coercive methods.World Wide Words
Issue 825: 30 March 2013, 'Catchpole'
During the
Great Depression The Great Depression was a severe worldwide economic depression An economic depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a economic recession, recess ...
of the 1930s in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
, large financial institutions relied heavily upon
foreclosure Foreclosure is a legal process in which a lender A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of ...
to collect outstanding mortgage debts, which gained an overwhelmingly negative public perception.


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 overcommitment 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 Dishonesty is to act without honesty ''Diogenes Searching for an Honest Man'', attributed to J. H. W. Tischbein () Honesty or truthfulness is a facet Facets () are flat faces on geometric shapes. The organization of naturally occurring facets ...
on the part of either the creditor or the debtor. The debtor may be either a person or an entity, such as a company. Collection of consumer debt is subject to greater regulation than the collection of business debt.


Development of debt collecting agencies

Once debtors prisons were abolished during the early 1800s, creditors had no solid recourse against delinquent debtors. If collateral was involved in the debt, such as with a
mortgage A mortgage loan or simply mortgage () is a loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient (i.e., the borrower) incurs a ...
, the creditor could take the property in order to indemnify themselves. However, for
unsecured debt In finance Finance is a term for the management, creation, and study of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, i ...
, creditors could not collect on their investments if the debtors had no money. Even if a creditor obtains a judgment against the debtor in court, collection remains dependent on the debtor's being able to repay the judgment. In a transaction involving the sale of goods, the court could potentially order the goods to be seized and returned to the seller, but many lenders and creditors had limited recourse beyond trying to verify a borrower or customer's creditworthiness before entering into a loan or transaction.


Types of debt collector

There are many types of collection agencies. First-party agencies are often 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 buyer A debt buyer is a company, sometimes a collection agency Debt collection is the process of pursuing payments of debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that ow ...
s purchase the debt at a percentage of its value, then attempt to collect it. Each country has its own rules and regulations regarding them.


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 that 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

A collection agency is a third-party agency, called such because such agencies 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 A service-level agreement (SLA) is a commitment between a service provider A service provider (SP) provides organizations with consulting, legal, real estate, communications, storage, processing. Although a service provider can be an organization ...
(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. 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%). Some debt purchasers who purchase sizable portfolios use a Master Servicer to assist in managing their portfolios (often ranging in thousands of files) across multiple collection agencies. Given the time-sensitive nature of these assets, many in the Accounts Receivable Management (ARM) industry believe there is a competitive advantage in utilizing this technique as it gives the debt purchaser more control and flexibility to maximize collections. Master Servicing fees may range from 4% to 6% of gross collections in addition to collection agency fees. Some agencies offer a flat fee "pre-collection" or "soft collection" service. The service sends a series of increasingly urgent letters, usually ten days apart, instructing debtors to pay the amount owed directly to the creditor or risk a collection action and negative credit report. Depending on the terms of the SLA, these accounts may revert to "hard collection" status at the agency's regular rates if the debtor does not respond. In many countries there is legislation to limit harassment and practices deemed unfair, for example limiting the hours during which the agency may telephone the debtor, prohibiting communication of the debt to a third party, prohibiting false, deceptive or misleading representations, and prohibiting threats, as distinct from notice of planned and not illegal steps. In the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
, consumer third-party agencies are subject to the federal
Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA), Pub. L. 95-109; 91 Stat. The ''United States Statutes at Large'', commonly referred to as the ''Statutes at Large'' and abbreviated Stat., are an official record of Act of Congress, Acts of Cong ...
of 1977 (FDCPA), which is administered by the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government Independent agencies of the United States federal government The federal government of the United States (U.S. federal government or U.S. gover ...

Federal Trade Commission
(FTC). In the United Kingdom third-party collection agencies that pursue debts regulated by the Consumer Credit Act must be approved and regulated by the
Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and T ...
.


Sale of debts

Debt collection may involve the sale of a debt to a third party company, sometimes referred to as a "
factor FACTOR (the Foundation to Assist Canadian Talent on Records) is a private non-profit organization "dedicated to providing assistance toward the growth and development of the Canadian music industry". FACTOR was founded in 1982 by radio broadcaste ...
" or "
debt buyer A debt buyer is a company, sometimes a collection agency Debt collection is the process of pursuing payments of debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that ow ...
". The debt buyer purchases accounts and debts from creditors for a percentage of the value of the debt and may subsequently pursue the
debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that ...
for the full balance due, including any interest that accrues under the terms of the original loan or credit agreement. The sale of debts and accounts provides a creditor with immediate revenue, albeit reduced from the face value of the debt, while shifting the work and risk of debt collection to the debt buyer. In the United States during the
savings and loan crisis The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of 1,043 out of the 3,234 savings and loan association A savings and loan association (S&L), or thrift institution, is a financial institution ...
of the 1980s, there was a huge resurgence of
foreclosure Foreclosure is a legal process in which a lender A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of ...
s and written-off accounts, similar, although on a much smaller scale, to that of the
Great Depression The Great Depression was a severe worldwide economic depression An economic depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a economic recession, recess ...
. Some financial innovators decided that there may be some profit in buying up delinquent accounts and attempting to collect a small portion of the amount due. They purchased these accounts from the original lenders at pennies on the dollar, and turned profit by collecting a fraction of what was owed by the debtor. Some states have specific laws regarding debt buying. For example, Massachusetts requires companies that buy debt to be licensed whereas California does not.


Collection practices

Debt collectors who work on
commission Commission or commissioning may refer to: Business and contracting * Commission (remuneration), a form of payment to an agent for services rendered ** Commission (art), the purchase or the creation of a piece of art most often on behalf of another ...
may be highly motivated to convince debtors to pay the debt. These practices may be regulated by the nation in which the collection activity occurs. Collection agencies are sometimes allowed to contact individuals other than the debtor, usually in an attempt to locate the debtor but without mentioning the debt. At times a person with no connection to the debt or the debtor may be contacted by a collector by error. Examples include victims of
identity theft Identity theft occurs when someone uses another person's personal identifying information, like their name, identifying number, or credit card number, without their permission, to commit fraud or other crimes. The term ''identity theft'' was coi ...

identity theft
and people erroneously targeted due to a similar name. Alternatively, the alleged debtor may dispute that the debt is payable. In such cases the alleged debtor can require that the collector or creditor prove that the debt is payable—in no jurisdiction does a debt exist merely because a collector says so. Relatives of deceased people do not necessarily themselves have to pay the debts of the deceased, but debts must be paid by the deceased person's
estate Estate or The Estate may refer to: Law * Estate (law), a term in common law for a person's property, entitlements and obligations * Estates of the realm, a broad social category in the histories of certain countries. ** The Estates, representative ...
. However, where a deceased person is the co-owner of property that is secured by their debt, it may be possible for the creditor to force the sale of the property to satisfy the debt. International debt collection is a specialised field. Not many companies specialize in this sort of collection as collection may require that their employees communicate in multiple languages and have a knowledge of the legal systems, laws and regulations of all nations in which they operate. Communication with a foreign debtor may occur in a language different from that used in the creditor's nation. Some debt collectors will network or partner with foreign debt collection agencies, with each agency involved in the collection process being familiar with the laws and languages of the nation in which it operates, allowing debt collection to occur through a local agency even when the debtor is in a different nation.


Collection account

A collection account is a person's
loan In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money avai ...
or
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
that has been submitted to a collection agency through a creditor.


Credit record

A credit record is a record of the credit history of a person or business entity, potentially including payment history, default and bankruptcy. Information about debts, late payments and default may be placed by a borrower's credit record, and usually remain for several years. Reports to credit reporting agencies may not necessarily be properly authenticated or checked for accuracy.


Re-aging of debt

In some instances, a debt collector will attempt to revive a debt that has expired due to the
statute of limitations A statute of limitations, known in civil law (legal system), civil law systems as a prescriptive period, is a law passed by a legislature, legislative body to set the maximum time after an event within which legal proceedings may be initiated. In ...
by themselves making a payment on the debt, "to re-age the account in order to have more time to collect". Such a payment, usually in a relatively small amount, may appear on a credit card statement as an "agency payment" or "transactional payment", and may also be referred to as a "phantom payment" since it is made by the collection agency, without the knowledge or permission of the debtor. Because this payment is not made by the debtor, an agency payment does not extend the statute of limitations beyond the last date when the debtor personally made a payment on the debt, and will likely be disregarded by a court when a debtor claims that the debt is expired under an applicable statute of limitations.


Regulation of debt collection


Canada

In
Canada Canada is a country in the northern part of North America North America is a continent A continent is any of several large landmasses. Generally identified by convention (norm), convention rather than any strict criteria, ...

Canada
, regulation is provided by the province or territory in which they operate. The law is typically called the Collection Agencies Act and usually affords a government ministry power to make regulations as needed. Regulations include calling times, frequency of calls and requirements for mailing correspondence prior to making telephone contact. Most debts in Ontario and Alberta are subject to a
limitation period A statute of limitations, known in civil law (legal system), civil law systems as a prescriptive period, is a law passed by a legislature, legislative body to set the maximum time after an event within which legal proceedings may be initiated. In ...
of two years. In most other provinces the limitation period is six years. After the corresponding (two or six, depending on province) anniversary of the last formal intention to pay the debt, neither the collection agency nor anyone else has legal authority to collect it.
Credit bureau A credit bureau is a data collection Data collection is the process of gathering and measuring Measurement is the quantification of attributes of an object or event, which can be used to compare with other objects or events. The scope an ...
s will retain both the debt and collection history on the debtor's credit file for 6–7 years, depending on province. Although the collection agency can continue to collect or attempt to collect the debt, they cannot garnish or place a lien on the debtor past the limitation period unless the court upholds a new date of last activity on the account based on other factors. Further information may be found in the regulations for the Province of Ontario relating to on prohibited debt collection practices. In
Manitoba Manitoba ( ) is a Provinces and territories of Canada, province of Canada at the Centre of Canada, longitudinal centre of the country. It is Canada's Population of Canada by province and territory, fifth-most populous province, with a population o ...

Manitoba
, the governing document is the Manitoba Consumer Protection Act. Complaints regarding violations of the Act should be directed to the Manitoba Consumer Protection Board who will either mediate or enforce the act when it is broken. Province-specific statutes: *
Alberta ("Strong and free") , image_map = Alberta in Canada 2.svg , Label_map = yes , coordinates = , official_lang = English , capital = Edmonton Edmonton ( ) is the capital ...

Alberta
– Collection Practices Act *
British Columbia ( en, Splendour without diminishment) , image_map = British Columbia in Canada 2.svg , Label_map = yes , coordinates = , official_lang = None , Slogan = Beautiful British C ...

British Columbia
– Business Practices and Consumer Protection Act *
Manitoba Manitoba ( ) is a Provinces and territories of Canada, province of Canada at the Centre of Canada, longitudinal centre of the country. It is Canada's Population of Canada by province and territory, fifth-most populous province, with a population o ...

Manitoba
– Consumer Protection Act *
New Brunswick ("Hope restored") , image_map = New Brunswick in Canada 2.svg , Label_map = yes , coordinates = , capital = Fredericton Fredericton (; ) is the capital city of the Canadian provinc ...

New Brunswick
– Collection Agencies Act *
Newfoundland and Labrador Newfoundland and Labrador (; sometimes abbreviated as NL) is the easternmost province of Canada The Province of Canada (or the United Province of Canada or the United Canadas) (french: link=no, Province du Canada) was a British North Am ...
– Collections Act *
Nova Scotia ) , image_map = Nova Scotia in Canada 2.svg , Label_map = yes , coordinates = , official_lang = English (''de facto'') , RegionalLang = French, Scots Gaelic , capital ...

Nova Scotia
– Collection Agencies Act *
Ontario ("Loyal she began, loyal she remains") , Label_map = yes , image_map = Ontario in Canada 2.svg , map_alt = Map showing Ontario's location east/central of Canada. , coordinates = , cap ...

Ontario
– Collection Agencies Act and Debt Collectors Act *
Prince Edward Island (''The small protected by the great'') , image_map = Prince Edward Island in Canada (special marker) 2.svg , Label_map = yes , coordinates = , official_lang = English English usually ref ...

Prince Edward Island
– Collection Agencies Act *
Quebec ) , image_shield=Armoiries du Québec.svg , image_flag=Flag of Quebec.svg , coordinates= , AdmittanceDate=July 1, 1867 , AdmittanceOrder=1st, with New Brunswick ("Hope restored") , image_map = New Brunswick in Canada 2.svg , ...

Quebec
– Act Respecting the Collection of Certain Debts *
Saskatchewan ("From Many Peoples Strength") , image_map = Saskatchewan in Canada 2.svg , Label_map = yes , coordinates = , official_lang = English language, English , capital = Regina, S ...
– Collection Agents Act


Spain

If talking to the debtor is unfruitful, a creditor can write a letter to the debtor outlining the following details: * the holder of the debt * the amount of the debt * the purpose of the debt * previous steps taken to recover the debt * steps that will be taken to recover the debt * a date by which payment of the debt is expected (a minimum of seven days) * a request for any disputed issues to be put in writing The assignment of the claim against the debt shall not be effective if the assigned debt is not real, legitimate, receivable arises from a crime or the debtor is a public institution, political party or homeless individual. A collection agency is usually better and faster. Some dress in costumes just to underline the message.


United Arab Emirates

Pursuant to the
UAE The United Arab Emirates (UAE; Arabic Arabic (, ' or , ' or ) is a Semitic language that first emerged in the 1st to 4th centuries CE.Semitic languages: an international handbook / edited by Stefan Weninger; in collaboration with Geoff ...

UAE
laws for financial debt collection, an extrinsic value asset needs to be shown to the creditor or the bank. That makes sure that if the debtor does not pay the unpaid invoices, his extrinsic asset can be taken by the creditor. If the debtor does not provide an extrinsic asset or pay back the financial amount, he is accountable to the civil and criminal liabilities. According to the UAE financial laws, it is stated under the Article 401 of the Penal Code that if the person provides a bounced cheque, he shall be fined for this criminal activity or given the punishment of imprisonment. As a creditor, you should communicate with the bank to know if the defaulter lacked funds before the provision of the cheque. If that is true, then a case is filed in the police station against the defaulter, after which they will investigate the matter and referred to the Public Prosecutor office. Also, you should know that the report cannot be filed after six months of the cheque issuance. The public prosecutor takes the case in its hand and investigates from both sides (creditor and debtor) for clarity of the case of bounced cheque. Upon the investigation, it is then decided if the defaulter has to pay the bail "Kafala" as to pay the amount of the asset of that worth the amount or deposit his passport. If the bail does not happen, then the defaulter is put behind the bars.


United Kingdom

In the , debt collection agencies are licensed and regulated by the
Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and T ...
(FCA). The FCA sets guidelines on how debt collection agencies can operate and lists examples of unfair practices. These guidelines are not law but they represent a summary and interpretation of various legal areas. Compliance with these guidelines are also used as a test of whether the agency is considered fit to hold a credit licence. Examples of unfair practices include misrepresenting enforcement powers (e.g., claiming that property may be seized), falsely claiming to be acting in an official capacity, harassment, claiming unenforceable or excessive charges, misrepresenting the legal position to a debtor, and falsely claiming that a court judgement has been obtained when it has not. The legal basis for these practices comes from section 40 of the
Administration of Justice Act 1970 The Administration of Justice Act 1970 (c. 31) is a UK Act of Parliament. Section 11 reforms the Debtors Act 1869 by further restricting the circumstances in which debtors may be sent to debtors' prison, prison. Section 40 includes a number of prov ...
. Collection agencies and their debt collectors in the UK are not the same as court-appointed
bailiff A bailiff (from Middle English Middle English (abbreviated to ME) was a form of the English language spoken after the Norman conquest of England, Norman conquest (1066) until the late 15th century. The English language underwent distinct va ...
s.


Scotland

Collection agencies and debt collectors based in the UK are permitted to invite debtors to attempt to repay debts but have no statutory authority in law to enforce debts unless they obtain a Decree (Scottish term for Judgement) against the debtor, although enforcement of the Decree is carried out, usually under instruction of a creditor or their appointed agent, by a
sheriff officer A sheriff officer is an officer of the Scottish sheriff court, responsible for serving documents and enforcing court orders. The jurisdiction of a sheriff officer is limited to the area of their commission (the relevant sheriffdom or Sheriff Court ...
or a
messenger-at-arms A messenger-at-arms is an officer of the Scotland, Scottish Court of Session, responsible for serving documents and enforcing court orders throughout Scotland. Messengers-at-arms must have a commission as a sheriff officer although, unlike sherif ...
. Likewise the creditor may move to inhibit, Attach or arrest in the hands of a third party with the assistance of an Officer of the Court. Scotland does not have a pre-action protocol and creditor agents need only be licensed if pursuing a consumer debt that is protected under the Consumer Credit Act.


United States

Within the United States, debt collection and debt collectors are subject to both state and federal regulation. Within the federal government, the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government Independent agencies of the United States federal government The federal government of the United States (U.S. federal government or U.S. gover ...

Federal Trade Commission
is the primary federal regulator of collection agencies. The Bureau of Consumer Financial Protection, housed within the
U.S. Federal Reserve The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency A currency, "in circulation", fr ...
, also has regulatory power over collection agencies. The CFPB announced on 24 October 2012, that it had finalized the rule for supervising debt collection agencies and debt buyers under a definition that would include about 175 U.S. companies. Many
U.S. states In the United States, a state is a Federated state, constituent political entity, of which there are currently 50. Bound together in a political union, each state holds governmental jurisdiction over a separate and defined geographic territor ...
and a few cities require collection agencies be
licensed A license (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of variety (linguistics), varieties of the English language native to the United States. Cur ...
and/or bonded. In addition, many states have laws regulating debt collection, to which agencies must adhere (see
fair debt collection Fair debt collection broadly refers to regulation of the United States debt collection industry at both the federal and state level. At the Federal level, it is primarily governed by the Fair Debt Collection Practices Act The Fair Debt Collection Pr ...
).


Fair Debt Collection Practices Act

The
Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA), Pub. L. 95-109; 91 Stat. The ''United States Statutes at Large'', commonly referred to as the ''Statutes at Large'' and abbreviated Stat., are an official record of Act of Congress, Acts of Cong ...
(FDCPA) is the primary federal law governing debt collection practices. The FDCPA allows aggrieved consumers to file private lawsuits against a collection agency that violates the Act. Alternatively, the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government Independent agencies of the United States federal government The federal government of the United States (U.S. federal government or U.S. gover ...

Federal Trade Commission
or a
state attorney general #REDIRECT State attorney general The state attorney general in each of the 50 U.S. states, of the District of Columbia, federal district, or of any of the Territories of the United States, territories is the chief legal advisor to the State govern ...
may take action against a noncompliant collection agency and, in the event a violation is found, may impose penalties including fines, damages, restriction of the debt collector's operations or closing down its operations, as occurred with CAMCO in 2006. Between 2010 and 2016 the Federal Trade Commission banned more than 60 companies that did not follow the
Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA), Pub. L. 95-109; 91 Stat. The ''United States Statutes at Large'', commonly referred to as the ''Statutes at Large'' and abbreviated Stat., are an official record of Act of Congress, Acts of Cong ...
. The FDCPA specifies that if a state law is more restrictive than the federal law, the state law will supersede the federal portion of the act. Thus, the more restrictive state laws will apply to any agency that is located in that state or makes calls to debtors inside such a state. Among the protections provided by the FDCPA are the following: * A debtor has the right to request written validation of the debt; * A debtor may demand that the collector cease communication. Section 809 of the Act directs that for disputed debts "the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt". When consumers resort to lawsuits against collectors who fail to verify debts, the collector is liable for the complainant's legal costs if the debt is found to be bogus. * A debt collection may not place a call to the debtor if the call will cost the debtor toll charges (in most other countries recipients of telephone calls are not charged, so this issue does not arise). * Limits are placed on the time of day that debt collection calls can be made, to whom, and where. If a person answers, the call center may track statistics (e.g., the times and days when someone answers) in order to place calls at times when the debtor is more likely to be home; typically this is done by an automated dialing system between the times of 8 a.m. and 9 p.m. local standard time. The collector may not use illegal and deceptive practices (e.g., threatening the debtor with arrest or impersonating law enforcement). * The collector cannot use obscene language and must inform the debtor of the nature of the call, their name, and the name of the collection company when requested. * Collectors must state their name and must give the name of their employer if the person specifically asks. They may only contact each person once, unless it is believed that the person gave the collector incorrect or incomplete information at the time, but now has complete or updated information. Collectors may contact a debtor at the workplace unless the collector has been informed the employer prohibits such calls. The FDCPA allows a collector to call a neighbor or relative for help in locating the debtor, but they may only ask for "address, home phone number, and place of work" and are "not permitted to discuss debt with anyone other than
he debtor He or HE may refer to: Language * He (pronoun) In Modern English Modern English (sometimes New English or NE (ME) as opposed to Middle English Middle English (abbreviated to ME) was a form of the English language spoken after the N ...
heir Inheritance is the practice of passing on private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property Public property i ...
spouse, or
heir Inheritance is the practice of passing on private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property Public property i ...
attorney". The debtor may grant a debt collector permission to the collection agency to speak to other people, but otherwise contact with an unauthorized person violates the FDCPA.


Fair Credit Reporting Act

In the United States, the
Fair Credit Reporting Act The Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, is U.S. Federal Government legislation enacted to promote the accuracy, fairness, and privacy Privacy (, ) is the ability of an individual or group to seclude themselves or information ab ...
(FCRA) is a federal law that regulates the manner in which consumer credit reporting agencies may maintain credit information. Among the protections the FCRA offers to consumers: * If an error occurs in the reporting of debt, the credit reporting agencies and information suppliers have a 21-day safe harbor period to correct the error and the safe harbor period can be used as an affirmative defense in a lawsuit. * If a debtor pays off a collection account, the item may remain on the debtor's credit report but must be marked "paid". * If information about debt that appears on a credit report is disputed by the debtor, the credit reporting agency must investigate the dispute. Unless the dispute is deemed frivolous, the credit reporting agency must normally complete its investigation within thirty days.


Voluntary standards

In addition to state and federal laws, many U.S. collection agencies belong to
trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific industry Industry may refer to: Economics * ...
called
ACA International ACA International is a trade group A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific industry I ...
and agree to abide by its code of ethics as a condition of membership. ACA's standards of conduct require its members to treat consumers with dignity and respect, and to appoint an officer with sufficient authority to handle consumer complaints. Consumers may attempt to resolve disputes with a collection agency who is a member of ACA through that organization's consumer complaint resolution program.


See also

*
Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

Bankruptcy
*
Credit risk A credit risk is risk of default Default may refer to: Law * Default (law), the failure to do something required by law ** Default (finance) In finance Finance is the study of financial institutions, financial markets and how they ope ...
*
Debt reliefDebt relief or debt cancellation is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particul ...
* Forensic corporate collections *
Distraint Distraint or distress is "the seizure of someone’s property in order to obtain payment of rent Rent may refer to: Economics *Renting Renting, also known as hiring or letting, is an agreement where a payment is made for the temporary ...
– "the seizure of someone’s property in order to obtain payment of rent or other money owed" *
Dunning (process) Dunning is the process of methodically communicating with customers to ensure the collection of accounts receivable. Communications progress from gentle reminders to threatening letters and phone calls and more or less intimidating location visits a ...
*
Tax refund interception A tax refund interception, also referred to as a tax refund offset, is the act of an agency responsible for sending tax refunds using all or part of a refund to fulfill an obligation of the taxpayer rather than sending the money to the taxpayer him ...
*
Predictive analytics Predictive analytics encompasses a variety of statistics, statistical techniques from data mining, predictive modelling, and machine learning that analyze current and historical facts to make predictions about future or otherwise unknown events. ...
*
Repossession Repossession, colloquially repo, is a "self-help Self-help or self-improvement is a self-guided improvement''APA Dictionary of Physicology'', 1st ed., Gary R. VandenBos, ed., Washington: American Psychological Association, 2007.—economically, ...

Repossession


References


External links


National Association of Collection Agents (NACA)

Debt Collection in UKFair Debt Collection Practices Act
- Federal Trade Commission.

- U.S. Department of Labor, Bureau of Labor Statistics.
ACA International, the Association of Credit and Collection Professionals


''
The New York Times ''The New York Times'' is an American daily newspaper based in New York City with a worldwide readership. Founded in 1851, the ''Times'' has since won List of Pulitzer Prizes awarded to The New York Times, 132 Pulitzer Prizes, the most of a ...

The New York Times
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