Debt collectors get paid when they recover delinquent debt. Old debt bought for pennies on the dollar has big profit potential.
Starting a Debt Collection Business
Starting a smaller debt collection business with a handful of employees requires minimal investment. You can start smaller for as little as $10,000. It’s also possible to start entirely on your own, hiring employees later as the business grows.
The FTC enforces the Fair Debt Collection Practices Act, making abusive, unfair, or deceptive practices illegal. Here are answers to frequently asked questions. If you continue ignoring the debt collector, they will likely file a lawsuit. Once judgment entered, they can garnish wages and seize property.
The most important things to start a debt-collection business are obtaining customers and finding debtors. The Financial Conduct Authority regulates consumer credit collections with rules debt collectors can’t break. If no contact for a long time, debt could become ‘statute barred’. Good debt helps reach goals like owning a home or starting a business.
In launching a collection agency:
- incorporate
- get licenses and permits
- get certifications
How Debt Collection Works
Paying off very old collections starts a new statute of limitations. In 2013, the average profit margin for collectors was 9 percent. It is legal to sell debt to a third party if no payment expected soon.
Many companies hesitant to approach an outside person to assist collecting debts. The recovery system followed by receivables management proven effective. If no reply, the company must continue sending invoices. Some collectors are purchasers; they buy debt for a percentage of face value then collect what they can. Lenders hand over accounts to collectors when borrowers default. This normally occurs three to six months after.
The Profitability of Debt Collecting
Is debt collecting a good business?
Debt collection can be quite profitable and can operate from your home or office. To start a debt-collection business, obtain customers and find debtors.
The FTC enforces laws making abusive, unfair, or deceptive debt collection practices illegal. Good debt like a mortgage can help reach goals, while bad debt from shopping sprees drains finances. Companies wanting help collecting past due accounts hire debt collectors. It’s a highly regulated industry with state and federal laws. There are benefits to becoming a collector if willing to invest time and effort.