Accounts Receivable Services » 4 Main Factors Affecting the Capability to Collect Outstanding Debts
Loan lack of interest from cash-strapped consumers and an aversion towards debt overall during the current economic recovery is causing further delays in the ability for a debt collector, debt collection company, or collection agency to retrieve outstanding debts, according to recent research.
Yet, the average U.S. citizen has three credit cards, amounting to more than $800 billion of revolving debt floating around in the U.S. economy that is subject to a 13 percent default rate, according to a January 2011 article in the Rochester Democrat and Chronicle.
The primary factors that affect a debt collection agency or a debt collector to get debtees to pay back an outstanding debt include:
1. Unemployment and Economic Factors: One of the most significant enemies to a collection agency in the recent months are recessionary forces. Debtees need income to pay back the debts they owe. But without a job, such debts linger pushing a debt collection company closer to the statute of limitations.
With the U.S. unemployment rate hovering above 9 percent throughout 2010 and 2009, hearing the words, "I have no job right now," is becoming a common expression for the millions of Americans out of work.
2. Legal Factors: The Fair Debt Collection Practices Act, which is enforced by the national consumer agency the Federal Trade Commission, restricts how debt collectors call, notify and generally collect the debts they believe are owed. Violation of this law can result in stiff penalties.
3. Collection Limitations: The amount of time a debt collection company has to retrieve an outstanding debt varies, depending on the type of debt and the state the debt was incurred in.
For instance, in Vermont, a debt collector has six years to collect on an outstanding contract or goods purchased on account. In Virginia, the same company would have only three years, according to the website Fair Debt Collection, http://www.fair-debt-collection.com/SOL-by-State.html.
4. Communication Factors: Consumers that are overwhelmed with a substantial amount of debt may decide to forego paying altogether unless a debt collection company can articulate the options he or she may have. For instance, a collection agency may be able to negotiate with a debtee to pay a lesser amount or ask for a more lenient grace period to avoid defaulting on a loan. A debt collector can also help a debtee tap into local resources, familial or certain public agencies that may help them pay back the outstanding debt with less pressure.
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