What is Consumer Debt Collection?

Consumer debt collection is the term applied to various strategies that are utilized by a lender or creditor to recover or collect outstanding debts that are owed by a borrower or debtor. Typically, strategies of this type are only implemented when the creditor has reason to believe that the consumer will not continue to honor the terms and conditions that led to the extension of the credit or loan currently in place. Often, the process begins with reminders issued by the lender when payments are late, and accelerates to the use of a debt collection agency if the consumer fails to respond to the efforts of the lender to collect the past due amount. In the most serious of situations, consumer debt collection may involve the utilization of a debt collection attorney who files a formal debt collection lawsuit, allowing the debt to be collected through the intervention of a court.

For the most part, the process of consumer debt collection begins with an effort by the lender to communicate with the debtor, identify the reasons for the delay in payment, and attempt to work out terms that are acceptable to both parties to bring the account up to date. Should these attempts fail, the lender may call the entire current debt due, while also closing the debtor’s account to continued use. At this point, the lender may allow the debtor a certain amount of time to settle the entire debt. Should the debtor not take advantage of this window of time, the lender often will secure the services of a debt collection agency, in hopes of recouping all or a portion of the outstanding balance.

When the collection agency is unable to secure payment on behalf of its client, the lender may choose to utilize current debt collection laws as a means of taking the debtor to court and securing a judgment against that debtor. Assuming that the suit is successful, the court may order consumer debt collection to commence in the form of a garnishment on wages, or the seizure and sale of assets owned by the debtor as a means of settling the debt. In general, lenders and creditors see this as a last resort, since the time and resources required to mount this type of action can be significant, and may in fact exceed the amount of the original debt.

All attempts at consumer debt collection must be conducted in compliance with the debt collection laws that are in place in the jurisdiction identified in the terms and provisions of the contract established between the debtor and lender at the time the business relationship was created. This means that if a debt collection agency uses techniques that are not considered legal, the agency may be found guilty of debt collection harassment and be subject to government-imposed fines and possibly litigation initiated by the debtor. Since debt collection laws vary from one nation to the next, and there are sometimes differences between credit card debt collection and other forms of debt collection, working with a legal professional who is well-versed in these laws is important.