All you need to know about Debt Management and Collections System
You might find it difficult to make exact monthly payments on credit bills. This is when a debt management plan will be helpful for you. It would become possible to make a single payment to a credit counseling agency. It is after this that the payments are done on your behalf. A debt management plan doesn’t reduce the amount that you are supposed to return. Thus the credit counselors help in lowering the interest rate and cutting down on some fees.
Stretching the payment period is another possible option. The duration of a debt plan is 3-5 years. Your financial situation will be thoroughly learned by your credit counselor.
Here, all of the available options will be discussed.
It is not mandatory to sign the first program that the credit agency offers you. Enrollment and payment will be made for each credit account. It costs around $24 per account. Student loans and secured debts are not covered.
However, the unsecured ones are covered. Your counseling agency will receive an electronic payment each month. Moreover, a progress report will also be sent to you each month. You cannot use your credit cards so long as you are there in the program. You can always make timely payments and meet the term of the creditor.
Most debt collection agencies specialize in a specific type of debt. An example is that of an agency that collects debts more than $200 but not that is more than 2 years old. If the original creditor finds it hard to collect a debt, he is free to sell it to a debt buyer. Such accounts are sold in a group.
Determining the debt type
The type of debt determines its price. All the collected debts are kept by the debt buyers. Money for recovering a delinquent account is received by them. A bigger profit is a result of recovered debts.
The delinquent borrowers are convinced to repay their debts via, phone or letters. Software or private investigators are called up in the case of their failure. Credit bureaus can also be informed in the case of delinquent payments.
The debtors shall be counted on a loan payment. Despite the knowledge of account numbers and routing, they are not allowed to take a paycheck from a bank. This would only be possible after the order of the court.
No reputable collectors would harass their borrowers. No discrimination is made against them against race, sex, gender or origin. They practice fair means and abide by the law. If in case it is learned that the debt is an impact of identity theft, they will verify it. A debt that is older than 7 years is not reported and people who lack money for repayment aren’t persuaded.
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How does the Debt Collection System work?
If the payment potential of the debt is very low, then the debt is sold cheap. Banks sell their debts for some percentage of their face value. Then the debt buyers make a decision on which the can sue you.
Later on, some debts are sold to other debt buyers. Thus, the credit of the buyers suffers 2,3 or 4 times.
What happens in debt collection is that debt collectors are assigned by debt collection agencies, who would eventually pay off 25% to 45% of the collected money from the borrower to these debt collectors. The collected debts are at least 60 days past due. Most debt collectors engage in collecting debts including credit card debts, medical debt, automobile loan debt, personal loan debt, business debt, student loan debt, even unpaid utility, and cell-phone bills.
There are also agencies which specialize in the type of debt that they receive. Delinquent debts of at least $200 that are less than 2 years old are collected. Different states have different statutes of limitations. Few agencies work based on these limitations. At times if the debt is too difficult to collect, then the collectors come to some negotiation with the customer. Sometimes these negotiations can even cause in the reduction of repayment amount by the borrower.
Tools to improve profitability
In order to keep your finances in check, it's good to keep track of your money records. The tools that would help you to improve profitability are given below.
Collection Advantage tool helps you to access information all throughout the day, that is 24/7 regarding critical debt collection. Analytical services are clubbed with consumer contact data and credit-based scoring.
The Eresolve online platform helps in consumer negotiation and payment of account past due via computer, smart-phone or tablet. This application helps in processing payments and moderation of conversation between the consumers. The process of collection is made less stressful.
The PowerCurve Collections is a debt management system that combines decisions, data connectivity, self-service capabilities, and work-flow. Collections process focuses on the customers.
Dealing with Student Loan Debts
The number of students who fall into student loan debt is increasing day by day. In this case, the student loan servicer transfers them to a third-party debt collection company.
If in case you default on your loans you can have a conversation with the collection agent who is assigned with your debt. You can fall on them for settling the repayment terms, loan rehabilitation or loan settling.
The Debt Management and Collections Systems, US Department of Education aims at repaying federal student loans. Your existing debt can hence be repaid. After this, you are also eligible to receive new fees. So information about the terms should be mentioned beforehand.
Typically a student falls into a student loan collection if the student hasn’t made payments for the student loans on an extended period. Penalties for this can vary from calls, letters and more.
How to not fall into a debt collection?
If payments on student loans aren’t made for 270 to 360 for days, then the loans fall into default. If this happens the balance of your loan will be due automatically. This is referred to as acceleration.
For falling into the collection status, collection fees will be assessed based on the student loans you owe. Collection fees depend on who is the loan holder and can range between 18% to 40% of your balance. This would create a serious impact on the loan balance that you’ll have to pay.
Till your loans are in default, the following can also happen.
Wage garnishment and taking up of income tax refunds in order to repay the debt.
Ineligibility to apply for federal financial aid. This continues until you have made 6 on-time monthly payments.
You also become ineligible for a loan deferment.
You can even lose subsidized interest benefits.
Up to 7 years, defaulted loans will appear on your credit. This creates a negative impact on your credit score and your ability to get other types of loans.
An attempt is made from the student loan agencies to collect the debt from you. Aggressive measures are usually followed by these collection agencies to make you repay the loan.
If you are contacted regularly, you should be aware of the legal rights under the Fair Debt Collection Practices Act.
The Debt Collection Practices Act contains regulations on not just the amount that you owe, but ways and times for the collectors to contact you in order to recover what you owe.
The Act also contains details on what the agencies cannot do in order to get your debt repaid.
The Act clearly says that the collection agency cannot threaten, harass or use obscene language. They can neither lie nor threaten you of an arrest if you don’t pay.
How to move out of debt collection?
You can get caught up on payments quickly. If you make a qualifying payment, this results in removing default and collection status immediately. Otherwise, you still have other options. In rehabilitation, you agree to a repayment plan with the Department of Education.
Upon making the required number of payments on time, your loan will be rehabilitated. Student loan consolidation combines the balances of several loans into one. The loans in default are included in this. Moreover, you’ll have to make at least 3 on-time, consecutive, and voluntary payments prior to the consolidation.
Student loan discharge with bankruptcy is an option. Though it will be difficult to discharge your loans in bankruptcy, it is not impossible to meet the right conditions. You can also repay the entire amount of your loan. This is probably not a good option considering the size of the loans.
How to avoid falling back to debt collection?
You’ll definitely have to make sure that you don’t fall into the same spot collection again. A manageable payment plan helps you to repay without missing any payments. Thus it is necessary to be proactive. It is necessary to make sure that the payment plan is right for you.
The monthly payment amount can be brought down based on a variety of factors using the most favorable student loan repayment plan. Many of these payment plans will be increased by the total amount that you’ll have to repay.
If in case you can’t repay, find out if student loan deferment or forbearance is the option that suits you the best. Deferment allows you to temporarily stop making payments on your loans. Moreover, during that period interest doesn’t accrue on subsidized loans.
You’ll still be eligible if you are enrolled in college at least half a time, or in cases like unemployment or military service. Though forbearance isn’t that advantageous as deferment, you’ll still remain responsible to pay the interest on your loans.
Forbearance helps you to stop making monthly payments up to 12 months. This non-payment can be caused due to financial hardship, illness, or other reasons.
Debt Collection Laws that protect you
The debt collection laws that can protect you are given below.
Fair Debt Collection Practices Law, grants limitations on what debt collection groups can do when they collect certain types of debt. Federal Fair Credit Reporting Act covers how debt collection is reported in credit reports. There are also state laws that provide protection.
These agencies do not contact you before 8:00 am and after 9:00 pm.
If you aren’t allowed to communicate with the debt collector at work, then he is not supposed to do so.
If you do not grant the debt collector, the permission to contact you in writing, then they cannot contact you except to take legal actions against you.
If a debt collector contacts you for the student loan debt, then the debt information as follows should be mentioned. The name of the creditor, the amount that is owed, debt dispute, name of the original creditor, different than the current one and more has to be included.
Popular debt collection agencies
1 - Account Control Technology, Inc - The agency was founded in 1990 in Woodland Hills, California. The mission of the agency is to improve the long-term financial well-being of clients, customers as well as those who work in the firm.
The agency is licensed in 50 states and complies with the principles and regulations. As a part of maintaining standards, the certifications that the agency has earned include FISMA, SSAE 16 Type 2, and PCI DSS Certifications. The agency adheres to FDCPA, TCPA, UDAAP along with other regulations and standards.
2 - Action Financial Services LLC – The agency is headquartered at Central Point, Oregon and has several employees who work towards the service of the communities.
3 - Coast Professional Inc. - Coast Professional Educational Service offers educational receivable collection services. Loan consolidation, default account rehabilitation, contingency collection, borrower tracing, password assistance, and online account management services are offered by Coast Professional Services. The organization was founded in 1976 and is currently based in West Monroe, Louisiana.
4 - Collection Technology Inc. - Collection Technology is based in Rancho, Cucamonga. CA.
5 - Credit Adjustments – Credit Adjustments was opened in 1977 with just six employees. The company has since evolved into a 300+ employee receivable management company. The company remains to be the leader in health-care and student loan collections.
By making use of human talent and automated solutions, the company aims to offer a package of contact management solutions. It was in 2008 that CAI became the contract holder of General Services Administration. Within a short span of time, CAI became one of the leading agencies with its praise-worthy performance.
6 - Delta Management Associates - Delta Management Associates was established in 1986 in the CommonWealth of Massachuessets. Delta has for more than 31 years, offered superior recovery and default management solutions in the higher education, government and financial services industries.
This agency has the power to work in all the 50 states. Regulatory, financial, privacy and security requirements of the popular institutions in the nation are met by Delta. With the use of advanced technology, data analysis tools, empowered business practices, and by following the dynamic regulatory environment Delta enhances its performance in all its dynamic financial services.
7 - ECSI Federal Perkins Server – Though ECSI does not offer student loans, it manages the collections of loans and processes the monthly payments. Private lenders and the Department of Education passes them to the ECSI in order to manage the borrowers.
8 - FMS Investment Corp – FMS grants revenue enhancement service to government and private sector clients. Various accounts receivable management solutions are granted by the developed and executed by the FMS. The company was founded in 1992 and has its headquarters in Rolling Meadows in Illinois. This investment corporation acts as a subsidiary of the Ceannate Corporation.
9 - GC Services – This firm offers a plethora of accounts receivables solutions, along with customer care solutions in the public and private sector organizations. Being one of the industry’s leading business process outsourcing providers, a wide variety of account receivable solutions are offered in both the public and private sector organizations.
High-class solutions are hence offered with highly skilled management and staff. The financial strength, industry involvement, and executive leadership are a few of the featured services offered by the GC Services.
10 - General Revenue Services – General Revenue corporation aims at generating a thorough evaluation of agency capabilities, services, and costs. The mission lies in line with client expectations.
A compliance conscious client service is made possible at a fee that enables dedicated, personnel, technological and analytical courses. The customization of processes helps in delivering a higher quality of service and praise-worthy innovations.
11 - Pioneer Credit Recovery Inc. – Pioneer Credit Service grants employment to more than 1000 employees and is headquartered in Wyoming County, New York. The firm also has offices in New Jersey. The firm also has established connections with federal, state clients and guarantee agencies. Quality results, experience, technology, infrastructure, telecommunications, and collections systems are offered at by the Pioneer.
12 - Central Research Inc. – Central Research Inc was founded by Johny Dillard, who is a retired marine corps officer. The firm provides management and financial services to federal, state and commercial sectors. Customized Business Solutions are rendered across quality and client-focused environment.
The firm upholds its capabilities including Professional Services, Document Management Services, Financial Services and Solutions, and Information Technology Solutions, The CBE Group Inc, Van Ru Credit Corporation, US Department of Treasury Debt Management Services, West Asset Management, Inc, Windham Professionals, Inc. are a few of the popular debt management associations.
American Student Assistance Corp, Bass & Associates, Collecto, Inc, ConServe, Debt Management and Collection Systems, Educational Credit Management Corp, Enterprise Recovery Systems, Immediate Credit Recovery Inc, Michigan Guaranty Agency, National Recoveries, Financial Asset Management Systems, National Credit Services, New York Higher Education Loan Program, Florida Department of Education OSFA are a few of the other popular debt collection agencies.
How to contact the debt management and collection systems?
The correspondence address of debt management and collections system is the same as that of the US Department of Education. The Default Resolution Group that functions under the Debt Management and Collections Systems can be called at 1-800-621-3115 for questions regarding defaulted student loans.
What is DMCS FSA?
Within the Federal Student Aid Category, there are several components of Collections and the largest one is the DMCS FSA.
Mention ways of Student Wage Garnishment?
Loan Consolidation, rehabilitation and paying off the debts are the different possible ways of Student Wage Garnishment.
How to avoid your loan from being placed in collections?
If you do not want your loan to be placed in collections, then the processes to be done includes contacting your loan holder, checking the credit report, application to the program, on-time payments, letter of recommendation, contacting the three credit bureaus.
What happens if you don’t pay your collections?
Collectors can sue you for a debt of any amount. If that is the case, you might even be asked to garnish your wages.
Can you go to jail for debt collections?
Some states recommend a jail sentence as a punishment for debt collections.
What happens if you ignore a debt collection agency?
Upon continuous ignoring of calls and letters, a lawsuit may be filed against you. If even after the lawsuit is ignored, this leads to judgment and the collection agency might garnish your wages or go after your bank account.
Mention the banks that are best for student loans?
Banks that are best for student loans include Citizens Bank, College Ave, Lendkey, Sallie Mae and more.
How many days are available for the borrower to dispute the debt, after the debt collector validates the debt?
You are allotted 30 days to dispute the validity of the debt.
What are the steps taken for privacy protection during debt collection?
A few of the steps taken for privacy protection during debt collection includes prohibition of collectors from communication with the third parties, prohibition of communication at an unusual place or time, prohibition of communication if the collector is aware that you are represented by an attorney, prohibition of communication, if the employer has prevented you from communicating.