Ethical Issues In Debt Collection

The perpetual war between rising living costs and shrinking wage packets has brought forth an onset of dark clouds. The result is that today's economic climate is reigned by evil towers of redundancy and tightening of belts.
To a laymen, this might well mean a time of sunshine for debt collectors. However, a quick word with a debt collector is enough to lay quick waste to such assumptions. In fact, for a debt collecting professional, the reality is far more starker than once can believe.
With rising debts comes increased insolvencies and with increased insolvencies the number of "can't pays" inevitably rises with the ultimate outcome being recovery of debts tending from hard to impossible. The problem is further invigorated by the insurmountable

Yet, businesses are coercing collection and recovery professionals to achieve such a balance head on. In such a scenario, what can be more prudent than chasing every outstanding debtor is to have tools that will enable debt collection agencies to put right resources in right place to recover debts which are recoverable. It is thus imperative that debt collection agencies are well aware of the process to be followed with respect of collection of debts in order to avoid any legal ramifications while at the same time not straying from the right code of ethics.

This White Paper, therefore, is an effort to bring out various aspects of debt collection along with kind of debt collections and process to be followed culminating with how debt collection agencies can benefit from the use of outsourcing.

The Debt Recovery Legislation in the USA is Fair Debt Collection Practices Act (FDCPA) which became effective in March 1978 and has been amended from time to time. FDCPA is a federal law which tends to limit the behavior and actions of a debt collector. The law, particularly, puts limitations on the means and methods adopted by a debt collector to contact a debtor together with the time and day when such contact could be made.

FDCPA is comprised of 19 sections from 801 to 819. While Section 802 focuses upon the purpose of the Act, Section 802(e) details that the aims of the legislation circles

Commercial Collection: The other type of debt collection is commercial collection. These debt collectors do not collect debts owned by individuals, but rather specialize in collecting debts owed by one business to another. Most of the time, these debts are for services or products ordered from a supplier of some sort that are never paid for. Commercial debt collectors collect from businesses both small and large; their clients are often businesses in varieties of industries. Commercial collectors are not subjected to the FDCPA, although their collection efforts are strictly monitored. Aggressive and unethical tactics are still prohibited, but the options available to commercial collectors are often more flexible than those available to consumer collectors. The primary tool of commercial debt collectors is telephone communication; once the business owner or department head in charge of bill payment (depending on the type of business) has been located, collectors make regular calls to try to work out a payment option that both the debtor and the creditor can agree