Exploring Common Misconceptions about the Credit and Collection Industry

Overview: Businesses in Delaware that sell goods and services on credit must handle accounts receivable. Inevitably, those Delaware businesses granting credit must decide what to do with past–due accounts. While third-party debt collection agencies provide valuable services by collecting delinquent accounts, thus lowering costs that would otherwise be passed on to consumers, professional debt collection agencies are often misunderstood. ACA International presents the following information to refute the myths about the collection agency industry and illustrate what the business is really about.

Myth: Debt collectors continually hassle people who cannot pay.
Fact: One of the first lessons a debt collector learns is that harassment of a consumer is both ineffective and illegal under the Fair Debt Collection Practices Act (FDCPA). Instead, debt collectors are trained to listen to what consumers say and determine if they actually have the resources to pay the past-due bill.

Myth: All debt collectors are the same.
Fact: There are differences between "in-house" debt collectors and "third-party" debt collection professionals. In-house debt collectors are often credit granters, while third-party debt collectors are licensed collection agencies. Also, the FDCPA, a federal law regulating collections, applies directly to all third-party debt collectors, but only under certain circumstances does it apply to in-house debt collectors.

Myth: Tough, threatening debt collectors are the most effective.
Fact: The most effective debt collectors are well-trained, sophisticated professionals who (1) understand what motivates a variety of people, (2) can determine quickly what will motivate a particular person and (3) are able to communicate well with others. The best debt collectors work with people to get their accounts paid.

Myth: A debt collector will come to your door.
Fact: The media has perpetuated the image of the debt collector knocking at the door for years. From Marx Brothers movies in the 1930s and depression-era cartoons to television and newspaper stories, debt collectors are shown knocking at the consumer's door. In reality, debt collectors rarely go to anyone's home or business to collect. It simply isn't efficient. Using telephones and modern technology, today's debt collector can make hundreds of contacts a day—many more than by going door-to-door.

Myth: Debt collectors force people into bankruptcy.
Fact: In reality, it would not make sense for a debt collector to encourage a consumer to file for bankruptcy. When people file for bankruptcy, their financial obligations to their creditors are usually wiped clean—and the credit granter and debt collector receive very little or nothing. Debt collectors understand that people in financial trouble often need guidance in settling their accounts without expensive litigation, and often need the flexibility of alternative payment arrangements to work out their financial trouble. A debt collector's business is to collect, but in practice, collecting often includes counseling.

Myth: Consumer conflict is the main interest of all debt collectors.
Fact: Media coverage of the collection agency industry often pits debt collectors against consumers. In reality, debt collectors are usually the first people to engage consumers in a problem-solving dialogue about their unpaid bills. Debt collectors receive many letters of thanks from people they have helped. Furthermore, the efforts of debt collectors keep the prices of goods and services from rising. Remember, there is no such thing as an unpaid bill. Through higher prices, consumers who do pay their bills end up paying for those who don't.

Myth: Economic doom means collection agency business boom.
Fact: Although more accounts are placed with professional collection agencies during a recession, those accounts are also less collectible. When people are unemployed and business is struggling, bills do not get paid. Furthermore, a prolonged recession with decreased buying power eventually translates into a contraction of accounts sent for collection. The bottom line: Collection agencies, like anyone else, prefer a healthy economy.

Myth: Debt collectors are a special breed of people.
Fact: Debt collectors come from all backgrounds with different experiences. Debt collectors often develop new traits and skills: quick–thinking, goal–oriented, problem–solving and effective communication. Tact, persistence and an understanding of people's motivations are traits of a good debt collector.

Myth: Debt collectors deal mainly with the destitute and the downtrodden.
Fact: Debt collectors learn quickly that debtors come from all walks of life. In fact, many people with debt are people like you and me who happened to be unable to pay bills for a time for one reason or another. Although debt collectors know that they must treat each person as an individual and understand each person's specific situation, they do recognize certain categories of people who experience financial difficulties:

• Those who don't understand the advantages of paying their bills.
• People who have had a change in their lifestyle due to death, illness, job loss or some other unforeseen and unplanned circumstance.
• Those who simply do not understand the complexities of buying on credit.
• People who promised to pay through credit agreements, broke their promises and are looking for ways to avoid payment.
• Credit criminals engaging in fraud.

Information taken from ACA International- the association for credit and collection professionals.