Dealing with Debt Collectors

By Dean Malone – www.deanmalone.com

Many consumers are shocked at the tactics used by some debt collectors. While there are likely many debt collectors that seek to comply with the law and treat consumers with respect, there are also many others that seem to care little about the law. A consumer must understand the motivations behind and the mechanics of debt collection in order to intelligently deal with a debt collector.

Money is the Motivating Factor

Debt collection is about one thing: money. Debt collection agencies exist to extract money from consumers and give a portion of that money to their "clients." Collection agencies' "clients" are the alleged creditors of the consumers from whom the collection agencies are attempting to collect. If a collection agency fails to satisfy its clients by collecting a large enough percentage of the dollar amount of the accounts placed with the agency for collection, then the agency's clients will recall their accounts.

The pressure to collect money begins with an agency's clients. Clients purportedly hold debts for which they are the creditor, and they want as large a portion of the debts collected as possible. A large, corporate client might place its defaulted credit accounts for collection with several different collection agencies. This enables the client to play the debt collection agencies against each other and threaten to retain only the agency that produces the greatest results.

A debt collection agency owner understands that she will only be able to remain in business if her agency satisfies her clients by collecting more money than other agencies. Therefore, she puts pressure on her upper level collection managers to collect as much money as possible. Those managers realize that their management positions, and ultimately their jobs, depend upon their ability to motivate their employees to collect the most money possible. Further, those managers might have "leads," or mid-level collection managers. Upper-level managers put pressure on the "leads" to collect as much as possible.

When a call is finally placed by an individual debt collector, it is placed with the understanding of and in response to the pressure brought to bear by clients, the agency owner, upper-level managers, and the debt collector's "lead."

The debt collector understands his goal: collect money from the consumer - now. The debt collector does not want money later. The debt collector wants and needs money now. Further, the debt collector understands that he will keep his job and earn bonuses only by collecting money in as large amounts and as fast as possible.

Bob’s Comments on Dean’s Article

This is why debt collectors go to any extent to collect debt. Harassment is a very effective way of collecting debt. Listen to the pod-cast of my latest interview with Dean Malone – Prudent Money Show – August 27, 2008.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.