What are the Most Common Debt Collection Practices?

Lori Smith

The most common debt collection practices include telephone calls and mail correspondence, especially in the early stages of a creditor’s attempt to recover payment. When less intrusive methods prove unsuccessful, sometimes collection efforts escalate to repossession, foreclosure, or civil legal proceedings. Regardless of the level of financial default, most creditors automatically report missed or late payments to consumer credit reporting agencies, which may tarnish a person’s credit worthiness. Individual debt collection practices may vary, often depending on the amount of money that is owed and the length of time the consumer is in arrears.

Collection harassment may involve repeated, intimidating phone calls to debtors.
Collection harassment may involve repeated, intimidating phone calls to debtors.

When someone is late on a loan or credit card payment, initial stages of debt recovery typically begin with a courtesy phone call from the creditor to remind the individual that the payment is due. Sometimes, a consumer simply forgets to pay a bill and the call is enough to remind him or her to send in the money. In cases where the debtor is unable to make good on his or obligation, payment arrangements are often negotiated to avoid escalation of collection actions.

Several countries have laws in place to protect debtors' rights.
Several countries have laws in place to protect debtors' rights.

When a person fails to follow through on a promise to pay, phone calls from the creditor usually become more frequent. Regularly scheduled monthly bills often include late fees. It is also common for a creditor to increase the annual percentage rate (APR) of a loan that is in default. This means that the finance charge increases, and the debtor pays even more money than he or she might have otherwise.

Within a few months of non-payment, more permanent action can be taken, such as the revocation of credit privileges. If the debt was incurred for an automobile loan, there is a good chance that the car will be repossessed. Foreclosure proceedings may begin when a home loan is in default. Many times, when the original creditor believes that the consumer does not intend to pay a debt, and efforts to encourage repayment have failed, the loan account is turned over to a collection agency.

Normally, a collection agency resumes attempts to collect money for their client, by phone and through the mail. Their debt collection practices typically include persuasive techniques to encourage payment. For example, they may offer a settlement, so that the obligation can be fulfilled for a fraction of the actual amount owed. If phone calls are avoided by the consumer, a debt collector often attempts to reach the individual at his or her place of business, and sometimes, at the home of a relative.

Debt collection practices may include the filing of a lawsuit in civil court. If the defendant is able to pay the entire amount in full, and does so, the claim will usually be dismissed. Otherwise, it is often acceptable to come up with an agreement of a specific dollar amount the debtor promises to pay each month. If the defendant is not willing to pay anything on the debt, without good cause to dispute it, then the adjudicator will typically order a judgment against the debtor. When that happens, it often leads to wage garnishments, tax liens, or other legal measures to satisfy the debt.

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Discussion Comments


@Terrificli -- Good advice, but it is important to point out that most debt collectors act within the scope of the Fair Debt Collection Practices Act. There are a few that try to skirt around it, but most creditors play by the rules.

Still, some do try to get away with things they shouldn't and debtors do need to know their rights.


If those debt collectors do come after you, make sure you know your rights under the U.S. Fair Debt Collection Practices Act. Even if you do owe money to a creditor, that federal law limits what creditors can and cannot do to collect from you. For example, you have a right to see proof of your debt, collectors cannot call between certain times and they are not allowed to threaten you in any way.

The act can be easily found on the Internet. Grab a copy, study it and make sure you are being treated fairly by debt collectors. You do have rights and you need to know them.

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