The process of following or pursuing the dept money, which may be owned by any individual or by any organization. This process is performed either by a person or by some organization; generally, it is done by the organizations, which are called collections agency or simply the debt collectors.
How does it work
The debt collection process is done by organizations, which are called as debt collectors. The organization mostly performs this process by the agents of money creditors. These organizations collect money from the debtors and take a percentage of the amount collected.
These organizations make records of every transaction and collect the money with interest.
Story of debt collectors
The process of debt collection was older than the money. This process is thought to be started in 3000 BC. It present at the oldest system of the credit and debit ‘the bartering’ system. In ancient civilization, if a person borrows money on the debt he has to pay back, but if due to some inappropriate conditions he is unable to pay it back the debt collectors force his family and friends for the money until the creditor could not get back his amount.
Varieties of debt collectors
Debt collection is a large process, which starts from the borrowing of the money to give it back. The debt collection agencies are of many types depending on the person or organization the lent money has to return. These types of agencies are as follows-
- First parties agencies
- Those organizations, which collect debt money, are subsidiaries or are associated with the same organization form, which the money was, lent. Most debt collection agencies are associated with the company that was the owner of the original debt money. These first parties’ agencies also try to make and maintain a better environment and customer relationship.
- These departments are called as ‘first party’ because of their relationship with the creditor. They usually try to obtain debt and hand over it to the third parties after several months.
- Third-party agency
- These types of agencies are just the opposite of the first party agency. These agencies are called as ‘third party’ because they are not the party of the original debt contractor.
The money creditor chose the debt collector according to their needs. These agencies sign an argument with the creditor for the percentage of the money they will receive from the creditor organization.
Sale of debt, In debt collection, one factor also involves which is called sale debt, which includes the selling of the debt to the third party which is also known as ‘debt buyer’.