We’ve talked before about the bad rap debt collectors get in movies and television. A lot of the misconceptions about debt collectors actually come from the behavior of debt buyers. If you are looking for new ways to pursue unpaid invoices, it’s important that you understand the difference between the debt buyers and debt collectors.
1. Debt Buyers Don’t Pay A Lot
Debt buyers usually only pay you pennies on the dollar for your unpaid invoices. The older the debt is, the less they’ll pay for it. This is part of their business model. A debt buyer will buy multiple (typically thousands) debts cheaply, on the chance that they can collect on some of them.
2. Debt Buyers Can Still Hurt Your Reputation
Once you sell your debt, you have no control over how the account is handled. In order to collect on a debt, debt buyers will have to reveal the details of the money owed. Consumers may not realize that it is not you, or your agent, pursuing them, but an unconnected person. This means that the actions of the debt buyer can still reflect poorly on you.
3. You Don’t Have to Tell People You’ve Sold Their Debt
You do not have to tell customers that you sold their debt to another company. A customer may not find out until they receive a letter from a company informing them that the debt has been purchased. The customer has the right to ask for verification of the debt. If you are collecting on your own invoices you are not bound by the Fair Debt Collection Practices Act (FDCPA). However, the debt buyer is. Commercial debt collectors are also not bound by FDCPA.
4. Once You Sell the Debt, It’s Gone
Once you sell your debt to a debt collector, you are no longer able to collect any money on it. So, if you sell a viable debt of $1,000 to a buyer for $100, that is all the money you will ever receive, even if the buyer is able to collect the full amount.
5. Debt Buyers Often Hire Debt Collectors
Rather than attempt to collect on the debt themselves, debt buyers often hire debt collectors to do so. So, if there’s a chance that your unpaid invoice can be collected on, you would be better off working directly with a debt collector. Reputable debt collectors work on contingency, so if they are unable to collect, you will not have to pay them.