When a creditor or lender has an outstanding loan with a debtor, they typically have two different options from which to choose from when it comes to collecting that debt. The first choice is a collections attorney, and the other is a collections agency. When trying to determine which is a better option for your debt collection purposes, it is important to know the differences between your choices. At Snellings Law in Parsippany, our collections attorneys are prepared to provide a wide array of legal services for your debt collection needs. To learn more, call or contact our office today to schedule a consultation.
Collections Agencies do Not Know the Law
Debt collection agencies are organizations with employees that utilize certain services like telephone calls and mailings to try and collect a debt, but they are not trained attorneys and do not know the law. A collections attorney can sit down with a client and explain all legal options available for collecting on a debt, including the use of wage garnishment, bank levies, and property liens in order to develop a comprehensive strategy for how best to collect outstanding debts.
Collections Attorneys can File a Lawsuit
Unlike collection agencies, which are limited in their means for collecting debts, a collections attorney can file a lawsuit on behalf of their client if traditional methods of collection are unsuccessful. With debt collection agencies, if they are unable to secure payment for their clients they must hand over their claim to a collections attorney in order to take the next step in the legal process. An additional benefit of collections attorneys is that when utilized from the beginning of a claim the creditor does not have to start over if initial collection methods are unsuccessful. The attorney already has a comprehensive understanding of the facts of the case and knows exactly how to proceed through legal processes.
Collections Agencies Fee Structures are Complex
The fee structures for collection agencies are often incredibly complex. Debt collection agencies may charge a series of fees based on the type of collection work requested, the age of the account, the size of the debt, and the response to their collection efforts. In many cases, debt collection agencies will require payment even if they are unsuccessful at their collection efforts with a debtor. The creditor will usually pay a fee to retain the collection agency, which is typically 35% to 50% of the debt balance. Even more fees are added if the collection agency has to turn the case over to a collections attorney.
Most collections attorneys charge a contingency fee for their work collecting debts on behalf of their clients. This means that the lawyer takes a percentage of the debt collected as a fee, but the creditor does not pay unless some portion of the debt is paid. There may be some additional fees, but they usually only apply if legal action is required to collect on the debt for court costs. This differs substantially from many debt collection agencies that require payment despite failed efforts at collecting payment for a debt.
Collections Attorneys can Collect Debts More Quickly
One final difference between collections attorneys and collection agencies is that attorneys can usually collect debts more quickly than an agency, especially when it comes to larger debts or those that require significant action to collect. Debt collection agencies are bound to very specific restrictions in their collection methods under state and federal law. They are only allowed to engage debtors in certain ways, at certain times, and as a result collection claims can remain unchanged for weeks, months, or even years with a collection agency. If an agency cannot collect the debt, it must then be turned over to a collections attorney to start an entirely different process for collection.
Collection attorneys, on the other hand, have many more tools at their disposal for collecting debts that often expedites the process. One significant restriction of debt collection agencies is that their collectors cannot threaten legal action to spur repayment. Collections attorneys can serve debtors with an intent to sue if the debt is not repaid, and the seriousness of that letter alone is often enough to get debtors to repay their creditors. Debtors take possible legal action far more seriously than a phone call from a debt collection agency, and as such, the repayment process is usually much faster with a collections attorney.
Talk to Snellings Law Today
If you would like to learn more about the differences between collections attorneys and collection agencies, call or contact Snellings Law today to schedule a consultation.