Bad Debt Collection Terms

Bad Debt Collection Terms

Bad Debt Collection Terms

You can see why you wouldn’t have wanted all of this information on the Plans and Pricing page! Every industry has its own terms and language, bad debt collections is no exception. While we tend to think everyone knows what we’re talking about when we use these terms, there is really no reason they should. I’ll keep this as succinct as possible.

Terms from the Plans and Pricing Page

Preliminary Skip Tracing

Before submitting an account we’ll perform a preliminary skip trace to maximize the possibility of successful delivery of the balance verification notice. Skip trace is “collection speak” for confirm the mailing address or look for a new one. This might also include a search for viable phone numbers, email, SSN (Social Security Number), and DOB (Date of Birth) one of which is required for credit reporting.

Balance Verification Notice

This is the first letter to be mailed. It is legally required to begin the collections process and its format is regulated by the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).

Mailgram Service

A specially formatted letter informing the debtor that they are about to be credit reported. Fully compliant with all current laws and regulations – this letter is designed to get immediate action from the debtor to avoid credit reporting.

Attorney Demand

A final demand letter written under theauspices of *our legal department.

Litigation is included as an additional collection remedy for difficult-to-recover accounts that transfer to contingency collections. *We will decide which accounts warrant litigation based on a thorough asset search conducted at our expense. You will be notified of such accounts and must give approval prior to the account being forwarded to a collection attorney. *We will then advance all costs associated with the filing of legal action as prescribed by law.

Telephone Campaign

Call center

A telephone campaign is three calls made at different times to increase the odds of reaching your debtor. One call is made in the morning, one in the afternoon on a different day, and a third on a Saturday. So an account with 10 telephone campaigns will receive 30 calls.

Portfolio Manager

Manager of several large balance collectors.

Optional Forwarding to Contingency Collections

At your discretion, any account not collected by the end of the program can be forwarded to contingency collections. *Our Contingent Recovery Division pursues harder to recover debts and second placements (accounts in default that have been unsuccessfully worked by another agency). Advanced collection efforts are provided and all payments are directed to *us for processing. Contingency collection services include litigation when warranted and are offered for a straight contingent fee of 50%. There are no additional up-front costs.

Optional Forwarding

Forwarding of uncollected accounts is both optional and AUTOMATIC!

You will receive notification when your accounts are scheduled to be transferred to contingency collections. You will have 30 days to cancel the transfer to contingency collections if you don’t want additional collection activity. During this time no additional collection activities will be conducted. If you do not cancel the account it will be transferred to *our contingency division and worked until it is either out of statute or determined to be uncollectable. (typically when the debtor has totally disappeared)

Contingency Collections

Contingency collections simply means no collection no fee. So additional fees are contingent upon your debtor paying. *Our contingency collection fee is a straight 50% of whatever is collected.

Credit Reporting

Credit Report

I’ve written extensively about Credit Reporting & The FDCPA – What You Need To Know credit reporting many times in this blog, nevertheless here is a brief description.

Credit reporting is the process of collecting, maintaining, and sharing information about an individual’s creditworthiness and financial history.

Credit bureaus gather credit-related data from various sources, including financial institutions, lenders, credit card companies, and other CRA’s Credit Reporting Agencies including some collection agencies. They compile this information into credit reports, which contain details about an individual’s borrowing and repayment history, outstanding debts, credit limits, and other relevant financial data.

Using various financial models the compiled information from the reports is used to generate a credit score, one of which is the FICO score.

A low FICO score can have significant negative impacts on an individual. It can result in difficulty obtaining credit or loans, higher interest rates, limited access to certain financial products, and reduced borrowing power. It may also affect employment opportunities, as some employers consider credit history during the hiring process. Additionally, a low FICO score can lead to higher insurance premiums and difficulty securing rental housing. Overall, a low FICO score can limit financial opportunities and make it more challenging to achieve financial goals and stability.

Because the results of negative credit reporting are so serious it is heavily regulated. The consequences of violating the FDCPA (Fair Debt Collection Practices Act) or the FCRA (Fair Credit Reporting Act) or any of the numerous other statutes, laws, and regulations governing these practices, are severe and expensive.

So we are careful! We can’t credit report everybody! The list of reasons we might not be able to credit report an individual is extensive and constantly changing. To receive more information about who we can or can’t credit report click here.

How long does it take?

If your debtor can be credit reported they will need to be sent the debt validation notice we mentioned earlier, first. Then they will have 30 days to dispute the debt. We can’t credit report during this period.

To remain fully compliant with all the statutes, laws and regulations we’ve already talked about, your debtor will be given every opportunity to pay for the full term of the collection program.

If, at the end of the collection process, typically 120 to 140 days, or, when the collector determines the debtor requires “hardcore” collections and pushes it into Phase 2 – contingency collections, your debtor has still not paid, or is not engaged in a reasonable payment plan – they will be credit reported to all three major credit bureaus.

General Bad Debt Collection Terms

  • Cease and Desist Letter – A cease and desist letter in the context of debt collections is a written communication sent by a debtor to a debt collector or collection agency, demanding that they cease all further communication regarding the debt. The FDCPA grants consumers the right to request that debt collectors stop contacting them, except for specific circumstances such as providing legal notice or responding to the debtor’s inquiry. A cease and desist letter does not absolve the debtor of the debt itself. It only restricts further communication from the debt collector. The debt collector may still pursue legal avenues to collect the debt, such as filing a lawsuit.
  • **Consumer Financial Protection Bureau (CFPB)** – A regulatory agency in the United States responsible for protecting consumers in the financial marketplace. It was established in 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its primary mission is to ensure that consumer financial products and services are fair, transparent, and free from abusive practices. The bureau regulates and supervises a wide range of financial institutions, including banks, credit unions, mortgage servicers, payday lenders, debt collectors, and other financial service providers.
  • Credit Bureau – An organization that monitors, scores, and reports personal or business credit activity. The three major credit bureaus in the US are Experian Equifax and Transunion. Debt Collection Agency
  • Credit Report – A report generated by credit reporting agencies about an individual’s creditworthiness and financial behavior. Lenders and other authorized entities can access these reports to assess an individual’s creditworthiness when considering extending credit, such as issuing a loan, credit card, or mortgage. Landlords, employers, and insurance companies may also utilize credit reports to evaluate an individual’s financial reliability and assess risks.
  • Creditor or Original Creditor – The person or entity who owns debt or is owed money.
  • Debt Collector -A debt collector is a person or entity that is engaged in the business of debt recovery including unpaid invoices and receivables from consumers or businesses who have failed to make payments as agreed.
  • Debtor – A debtor (silent b it’s pronounced detor) is the person or entity that owes money or has outstanding debt
  • Default – The failure of a debtor to fulfill their obligation to repay a debt according to the agreed-upon terms and conditions.
  • Dispute – This is when a debtor claims he doesn’t owe the past due balance a creditor says he owes.
  • Factor or Factoring – Factoring is when a company sells its accounts receivable to a third party known as a factor at a discounted price. The factor then assumes the responsibility of collecting payments from the company’s customers.
  • Federal Trade Commission – An independent federal agency in the United States that serves as the primary consumer protection and competition enforcement agency. The FTC’s mission is to promote fair business practices, protect consumers from fraudulent and deceptive practices, and maintain competition in the marketplace.
  • First Party – You are both the first party and the creditor. If you own a company or work in the accounts receivable department of a company, you are still the first party.
  • Judgment – A judgment is the final ruling made by a judge in court. It is the court’s official determination regarding the rights and liabilities of the parties involved in the legal dispute. A judgment must be complied with by both parties and is enforceable through various means such as wage garnishment, bank account liens, property seizure, and other legal mechanisms.
  • Skip Tracing – The process of conducting a database search for contact information on a debtor. Typically this is done by a debt collector at a collection agency when mail is returned from a debtor or their phone numbers are disconnected or wrong.
  • Statute of Limitations – The legal time limit within which a creditor or debt collector can file a lawsuit to enforce the collection of a debt. The duration of the statute of limitations for debt collection varies depending on the jurisdiction and the type of debt involved.  The statute of limitations only pertains to the legal enforcement of a debt through a lawsuit. It does not eliminate the underlying debt itself. And the debtor may still be responsible for repaying the debt even after the statute of limitations has expired.
  • Third-Party – The collection agency is the third party. The term third-party collections typically means a collection agency is collecting the account.

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