4 Primary Factors Affecting the Capacity to Collect Outstanding Debts

Accounts Receivable Services » 4 Primary Factors Affecting the Capacity to Collect Outstanding Debts

credit lack of interest from cash-strapped consumers and an dislike 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 reports.
Yet, the average American 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 main factors that affect a debt collection agency or a debt collector to get debtees to pay back an outstanding debt are: 

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 persistently 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 popular 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 length 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 significant amount of debt may decide to give up paying altogether unless a debt collection company can present 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 prevent from 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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