Brennan and Clark – How Debt Collection Agencies Work
There are two different types of debt which people have, the first is healthy and manageable debt which has been used for a purchase or for spending and the second is mismanaged debt which can leave people unable to pay. The former is of course a healthy part of a good economic approach but the latter is something which thousands of people struggle with each day. The impact of unpaid debt can be damaging for many financial institutions and businesses and that is why there are many companies like Brennan and Clark, who operate a business which seeks to resolve the debt issues.
How They Work
What a company will do when a debt goes unpaid is to send letters and make phone calls in an effort to speak with the debtor and resolve the issue. The problem for these businesses therefore is that the longer that the debt goes unpaid, they are losing money from interest, the repayment itself and they are also investing time and money into chasing up the debts. What these businesses will do therefore is sell the debt to a debt collection agency, for a lower price.
In most cases the financial institution will package up groups of unpaid debts and sell them as a job lot to the debt collection agency. Let’s say that someone owes $1000 and stops paying their monthly payment of $60, of which the company will make $10 on interest. It is never worth the company’s while to invest money in taking someone like this to court and so it is far easier for them to sell this debt for $600 to a debt collection agency, than to potentially lose $1000.
A debt collection agency will also send letters and try to make contact with the debtor, in an effort to get them to start making repayments. In the example above edit collection agencies have more power to help the client over their $1000 debt, because they have only paid $600. This could mean offering to stop interest or lowering the monthly payments until it is resolved, often accepting a lump sum payment of less than the original debt. A debt collection agency for example could offer the debtor the chance to settle the debt with a lump sum payment of $800, in this case the agency makes $200, the debtor is free from debt for less than he borrowed and everyone walks away happy.
Despite the negative reputation that some debt collection agencies have there are far more reputable agencies than bad ones and the reputation is in fact quite unfair. These businesses provide a service which greatly helps both individuals in debt and companies who are exposed. Any extreme action which must be taken by a debt collection agency will always have to be decreed first by a court of law.