Third-party debt collection agencies are not immune from regulation, regardless of how their efforts may feel to consumers. Collection agencies have a reputation for aggressiveness, in large part because their own financial health depends on how efficiently and fully they can collect from those who owe money. But those aggressive tactics may ultimately end up benefiting consumers. That's because lenders that are able to recoup their losses have more money on hand to extend as credit. When lenders lose money to delinquent borrowers, they have less money to extend to anyone, including those with good credit scores.
What are the rules?
Whether businesses collect their own debts or contract with a third party, debt collectors are constrained by certain rules. For example:
- Collectors are not allowed to harass debtors at work.
- Collectors must limit their collection efforts to reasonable times and places.
- When it is clear or should be clear that a debtor has an attorney, the collector must contact the debtor only through that attorney.
- Debt collection letters must be worded precisely and not contain misleading language.
Some, however, believe that not only are these restrictions too limiting, but that they also ultimately result in less available credit for reliable borrowers. More aggressive tactics, in other words, would result in greater debt recovery, and the additional funds could be made available to others looking to borrow money. In other words, despite the negative feeling many consumers have about debt collection efforts, those charged with the task perform an essential service, not only to the business trying to limit their losses but also to the larger economy.