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Collection agencies can help lenders recover debts

Sometimes, when a borrower in Tennessee fails to make payments on a loan, such as an auto loan or credit card account, the lender may need to enlist the services of a collection agency. A collection agency is a business that lenders contract with to recover debts owed to them, usually after the lender has made numerous attempts to collect on the loan on their own.

In general, when a debtor does not pay what he or she owes on a loan for a period of time (usually three to six months), the debt will be placed in the hands of the collection agency. While there are limits on when a collection agency can contact a debtor, in general the collection agency can call the debtor on the phone either at home or at work to attempt to collect on the debt. The collection agency can also contact relatives or friends of the debtor, not to collect on the debt, but to confirm they have the right contact information for the debtor. However, when contacting relatives and friends of the debtor, the collection agency is not permitted to state why they are trying to contact the debtor. Collection agencies can also send late payment notices to the debtor through the mail.

However, collection agencies are bound to certain limitations under the Fair Debt Collection Practices Act. No collections can be made on accounts that have been charged off as uncollectable. Collection agencies are bound to certain statutes of limitations and cannot threaten to file a lawsuit against the debtor or cause the debtor physical harm.

If the debtor pays what he or she owes, the collection agency will generally receive a percentage of these payments. In this way, both the lender and the collection agency benefit when the debtor pays what is due. While collection agencies are limited in what they can do by the FDCPA, they can still be a valuable tool for lenders who are not receiving what they are owed by debtors.

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