Third-Party Debt Collection Makes More Sense for Credit Card Delinquencies

Credit card bills need to be cleared as quickly as possible. Failure to clear payment can lead to collection calls and written demands for payment. The credit card company simply hands the list of debtors to a third-party debt collection agency. By then, these companies will contact to collect the debt or that they now own it.

The various parties involved in credit card debt collection include the original creditor, debt collection agencies, debt buyers and lawyers. When you understand the role of these different players, along with the life cycle of the credit card debt, it can be helpful when negotiating a settlement or dealing with a lawsuit.

Original creditor vs collection agencies

The original creditor is generally a credit card company. These can be banks or financial institutions. Retailers can be original creditors when they extend credit. Meanwhile, the third-party debt collection is the creditor that hires to collect the debt on the creditor’s behalf. Here, the collection agency gets paid a percentage of the money they recover or a flat fee. These agencies must refer to the original creditor as “clients” as the original creditor still owns the loan.

Delinquencies in the credit card collection

The longer the credit card goes unpaid, the more it will probably change hands. The delinquent debt cycle typically works, and here’s what will likely happen throughout the process.

  • Collection activities

    Once you fall delinquent on the credit card debt, the original creditor will typically perform collection activities such as sending letters demanding payment and making collection calls to you. Collection activities will continue for about 30 to 90 days. However, original creditors are not equipped to conduct prolonged collections on long-overdue debts.

    The collection agency will send demand letters and call the debtor to try to collect. When one collection strategy fails to collect, another plan gets implemented. Meanwhile, the original creditor typically has a contract with a third-party debt collection agency. Sometimes, there can be multiple collection agencies contacting the debtors.

  • Lawsuit

    The creditor or a debt buyer might file a lawsuit to collect from you. Besides, debt buyers are more than original creditors. So when a debt buyer files a lawsuit, it’s best to respond by making the debt buyer prove the amount of the debt it claims you owe and that it owns the debt.

    If sued by the original creditor, the third-party debt collection agency will try to settle for less than what they owe. However, any settlement amount will likely add attorneys’ fees and court costs.

Final Wrap

When running collection calls and demand letters, you must consider talking to a third-party debt collection agency. This is because most of the purchased debt is within the statute of limitations and permits them to attempt to collect the debt legally. Also, in most states, the collection on credit is between 3 and 6 years.

At Vital Solutions, we help resolve numerous credit card delinquencies. To learn more about the service, get in touch with us today!

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