Handling Debt Sold – Collection Agency Merchant Services
Before a lender gives you money, you must agree to pay back the amount with interest. The terms of the agreement always specify the amount that is to be paid every week or month. Should the terms of this agreement be in default, the lender will most likely request the services of a debt collection agency. For a collection agency to accept credit card payments for debt owed, they need to apply for a collection agency merchant services account.
The borrower can occasionally make these payments via credit and debit cards. However, acquiring a payment processing solution for accepting credit card payments for debt owed on an past due account in collections, is never an easy task. Acquiring banks and payment processors will always consider this business model a “high risk business.”
It is up to every lender to decide how many payments a borrower can miss before the debt goes into default. It is also up to the lender on when to request the services of a debt collection industry to help recover the debt. The debt collector should always have the flexibility to accept credit card payments for debt owed to help ease the repayment of the debt.
For a collection agency to have this ability, they need to employ the services of a high risk merchant provider. Once approved with a proper debt collection merchant account, they will have the ability to process credit card payments for the debt owed.
With some creditors, the debt goes into default as soon as the borrower misses a single payment. More tolerant lenders charge late fees for several missed payments before taking any action. Once the lender has requested the services of a collection agency, all communications will take place with the collection agency only. At this stage, the debt has either been sold or some type of arrangement has been made to recover the debt for a fee.
If no payment has been made within 60 days or more, creditors usually choose to go a different route. This approach involves cutting losses and selling their debts to collection agencies. These agencies will more than likely have a proper merchant account for collections.
It is crucial to allow multiple, flexible options to the debtor for the repayment of the debt. Allowing borrowers to make credit card payments for debt owed is a necessary option. Successful collection agencies are aware of this and have already established a credit card processing account with a high risk merchant account services provider to help facilitate these payments.
When your debt is sold to collection agencies, it means the responsibility of collecting what you owe has been transferred from the creditor to a debt collection business.
Why Creditors Sell Debts to Collection Agencies
Creditors focus mainly on lending money and getting it back with minimal hassles. They are not collector companies that track down debt defaulters and issue threats in order to recover their money by all means.
Creditors will get in touch by email or telephone to remind you when payments are late. But if you receive multiple notifications and fail to respond, your debt will likely be passed on to a collections agency.
When a debt is sold by a creditor to a debt collection company, it is called a “purchased debt.” Collection agencies buy a debt at a reduced amount and make a profit by collecting the entire sum from the defaulter.
Collection agency services are common in the recovery of credit card debts, cell phone bills, medical bills, bank overdraft charges, auto loans, student loans and utility bills.
Can You Refuse to Pay Arrears to a Collections Agency?
Once your payments are in arrears and have been passed on to a collections agency, payments are made solely to the agency and not the original creditor.
Debt collectors are not known for the tolerance and patience usually associated with creditors. Debt buyer companies are dogged and determined when it comes to recovering arrears.
According to ProPublica, debt collectors raked in millions during the pandemic that ravaged the United States and the rest of the world.
Encore Capital, the largest debt buyer in the country, set a new record in debts recovered in a single quarter.
While debtors are not always forthcoming on payments, collection agency merchant services use legal action as a last resort. Once you are served with a formal notification to appear in court, it is very important that you show up.
If you do not appear, the judge has the right to rule against you. In your absence the Judge can decide to have money taken directly from your paycheck or even have your assets seized until you pay back what you owe.
Collection Agency Merchant Services – What to Do When You Have to Pay Back a Debt Collector
Debt collection agents are constantly under pressure because their jobs depend on results. Due to this challenge, many agents often overstep their boundaries and have no issues with manipulating the law.
This is why incidents of debt collectors sending rude text messages, calling in late-hours of the night and showing up unannounced remain common.
Any debt collector acting out of line can be sued or reported to the Federal Trade Commission (FTC) or Consumer Financial Protection Bureau (CFTB).
The Fair Debt Collection Practices Act (FDCPA) also discloses how collection agency merchant services should conduct themselves when recovering arrears.
Debt collectors cannot use obscene language or threaten you with violence if you lag behind on payments. They also have no reason to contact you at work or reveal to a coworker that you owe them money.
It helps to know what the law says about your situation, so that a debt collector does not take advantage of you.
With a good grasp of debt collection laws, you can also rework your payment plan, pay less than what you owe and even remove negative information from your credit report.
Can You Dispute Making a Payment to a Debt Collection Agency?
Under the debt collections best practices act, you can dispute a debt and ask the collections company to provide a statement outlining the exact amount you owe.
Make sure that you verify this amount and any additional fees with your original creditor before you make any payments.
By law, you can dispute the debt quoted to you. The amount could be inaccurate; the debt could even belong to someone else.
Until the collection merchant agency provides you with sufficient information that the debt belongs to you, do not accept their word for it.
Keep in mind that collection agencies are not perfect. Sometimes, they will reach out to different people with the same name and ask everyone to pay up.
Many collection agencies fall short in tracking down the right people. There have been many cases of collection agencies pinning debts on the wrong people.
Debt collection agencies have no reason to pursue any payments with you until they can convince you that the debt is 100% yours.
Once this has been confirmed, do not make payments on your debt by paying cash. The best way to settle your arrears is to send a check by mail with a return receipt.
Receipts come in handy when dubious collection merchant agency services dispute payment claims.
If you are dealing with a problematic collections agency and you are looking for an effective way to handle them, consider employing the services of an attorney.
Under the Fair Debt Collections Practices Act, a debt collector can only talk to your legal representative. They have no reason to deal with you directly, if that is what you want.
How Debt Collections Affect Your Credit Score
Any payment that is 30 days late will show up on your credit report as a negative entry. Entries made 30 days late, 60 days late or 90 days late appear as nonpayment entries.
This development leaves a dent in your payment history because it comprises 35% of your credit score.
When a debt is sold to a collection agency, a brand new collection account is added to your credit history. If the debt is sold to yet another debt collection business, another account will be added to your credit report.
Renegotiate Payment Terms with a Debt Collection Agency
When you pay your debt in full, it should show up on your credit report as fully paid. This improves your credit score and allows you access to loans at cheaper interest rates.
If you do not have enough money for an outright settlement, consider renegotiating the debt.
Before taking this approach, make sure you send a formal letter to the collection merchant agency service stating your intention. If the agency turns down your offer, you can work out a weekly or monthly payment plan.
If you have proof of disrespectful phone calls, threats of violence or a collector showing up uninvited at your home or workplace, it strengthens your case for debt settlement negotiations.
Remove Negative Entries from Your Credit Report
If you successfully negotiate a single payment settlement, you have the right to ask for negative entries to be deleted from your credit report.
The 3 leading credit reporting bureaus are TransUnion, Equifax and Experian. Work with the collection agency and get the credit bureaus to erase the debt from your files.
Note that only information from a particular debt collector will be deleted. If your account has been passed around to several collection agency merchant services, you will need to contact each collections business.
Once you successfully settle your debt, make sure that the settlement is well documented. The collection agency should also mark the debt as “paid in full” in your report.
Prevent Further Accounts from Going to Collection Agencies
Once your arrears are settled with a collection agency, take steps to avoid it from happening again in the future.
Always work with a budget for all expenses and pay off debts quickly before they accumulate.
If you have trouble paying off your debts consider taking out a debt consolidation loan. This allows you to pay debts with less interest.
Whatever decision you take concerning your finances, always find a way to be in charge of your finances and not allow your finances to be in charge of you.
It is best to always try and manage your debts without pressure. Try not to worry about your account going to a collection agency. If you simply can not pay the debt, there is not much the collection agency merchant service can do for you.
Do your best to work on your finances and when you are in a position to repay a good portion of the debt, start communications then. You should usually be able to negotiate a payoff less than the original amount if you try.
To accept credit card payments for debt owed, apply for a collection agency merchant service account. Please use the application process below or reach out to one of our seasoned professionals at 800-419-1772.