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How Do Collection Agencies Make Money?

Written on November 17, 2023   By   in BUSINESS

When debt is past due, credit card companies, lenders and others often send overdue accounts to collections agencies. These are third-party companies that pursue the collection of outstanding debt in exchange for a cut of what is recovered. Collections can have a major impact on your credit and financial well-being. However, your rights and options for dealing with debt collectors can limit their impact.Source :

How Do Collection Agencies Make Money?

The rules about what can be done to you if you owe a debt to a collection agency vary by state. But most laws require that a debt collector provide you with specific information about the debt you owe. This includes the name of the original creditor, how much you owe, and whether the debt is within your state’s statute of limitations. Collectors are also required to tell you that you have 30 days to dispute the debt in writing.

You should dispute the debt if it is incorrect or you don’t think you owe it. In addition, you have the right to ask a debt collector to stop calling or writing to you if you tell them that in writing. Debt collectors cannot call you at work or at a time they know is inconvenient to you. They also cannot contact other people to find out where you live or where you work without your permission.

Depending on your state law, you may be able to halt debt collection when you file for bankruptcy. If you can pay the debt, doing so will end the collection process and stop it from affecting your credit in the future. Otherwise, you will likely need to deal with the collection agency through a court-approved repayment plan.

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