Author: The definition of a collection account is an account with late payments that have been forwarded to a bill collection company, generally when the debt has fallen ninety to one hundred and twenty days late. Creditors will either attempt to collect their debts themselves, or more often send unpaid accounts to third party collection agencies to remove them from their accounts receivables. Then they will write off the debt in full that is owed as a loss.
From doing this, the creditors benefit in two ways: first, they are capable of writing the debt off as a loss on their taxes, and second, the money that does get collected can be recorded as a profit. Time is the enemy in the debt collection industry, and when an account gets to be a particular age, it may be sold from the original creditor to a third party collection agency for a fraction of the original amount.
The third party agency becomes the creditor after this, the original creditor makes a profit from selling the debt, and any cash that the third party collection company collects after the original purchase goes straight to them.
After receiving mail correspondence from a debt collection agency, it is always a safe move to be certain that the agency that is contacting you has the legal right to collect the debt on your late account. By law you have five days after the agency contacts you to request verification of the debt, and you must do this in writing. Get the fax number of the debt collection agency for this purpose.
Try to remember that a bill collection company might hold on to a collection account for only a few months, and if they cannot collect the debt that is owed, the account may be forwarded to another debt collection agency. This process continues until the account is paid, or the statute of limitations (usually seven years but depends by state) on the debt runs out.
Rapid Recovery Solution is a commercial collection agency that does stories about commercial debt collections. This article, What Is A Collections Account? Debt Collection Basics Part One is available for free reprint.
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