We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What are the Most Common Debt Collection Practices?

By Lori Smith
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The most common debt collection practices include telephone calls and mail correspondence, especially in the early stages of a creditor’s attempt to recover payment. When less intrusive methods prove unsuccessful, sometimes collection efforts escalate to repossession, foreclosure, or civil legal proceedings. Regardless of the level of financial default, most creditors automatically report missed or late payments to consumer credit reporting agencies, which may tarnish a person’s credit worthiness. Individual debt collection practices may vary, often depending on the amount of money that is owed and the length of time the consumer is in arrears.

When someone is late on a loan or credit card payment, initial stages of debt recovery typically begin with a courtesy phone call from the creditor to remind the individual that the payment is due. Sometimes, a consumer simply forgets to pay a bill and the call is enough to remind him or her to send in the money. In cases where the debtor is unable to make good on his or obligation, payment arrangements are often negotiated to avoid escalation of collection actions.

When a person fails to follow through on a promise to pay, phone calls from the creditor usually become more frequent. Regularly scheduled monthly bills often include late fees. It is also common for a creditor to increase the annual percentage rate (APR) of a loan that is in default. This means that the finance charge increases, and the debtor pays even more money than he or she might have otherwise.

Within a few months of non-payment, more permanent action can be taken, such as the revocation of credit privileges. If the debt was incurred for an automobile loan, there is a good chance that the car will be repossessed. Foreclosure proceedings may begin when a home loan is in default. Many times, when the original creditor believes that the consumer does not intend to pay a debt, and efforts to encourage repayment have failed, the loan account is turned over to a collection agency.

Normally, a collection agency resumes attempts to collect money for their client, by phone and through the mail. Their debt collection practices typically include persuasive techniques to encourage payment. For example, they may offer a settlement, so that the obligation can be fulfilled for a fraction of the actual amount owed. If phone calls are avoided by the consumer, a debt collector often attempts to reach the individual at his or her place of business, and sometimes, at the home of a relative.

Debt collection practices may include the filing of a lawsuit in civil court. If the defendant is able to pay the entire amount in full, and does so, the claim will usually be dismissed. Otherwise, it is often acceptable to come up with an agreement of a specific dollar amount the debtor promises to pay each month. If the defendant is not willing to pay anything on the debt, without good cause to dispute it, then the adjudicator will typically order a judgment against the debtor. When that happens, it often leads to wage garnishments, tax liens, or other legal measures to satisfy the debt.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By Logicfest — On Aug 25, 2014

@Terrificli -- Good advice, but it is important to point out that most debt collectors act within the scope of the Fair Debt Collection Practices Act. There are a few that try to skirt around it, but most creditors play by the rules.

Still, some do try to get away with things they shouldn't and debtors do need to know their rights.

By Terrificli — On Aug 24, 2014

If those debt collectors do come after you, make sure you know your rights under the U.S. Fair Debt Collection Practices Act. Even if you do owe money to a creditor, that federal law limits what creditors can and cannot do to collect from you. For example, you have a right to see proof of your debt, collectors cannot call between certain times and they are not allowed to threaten you in any way.

The act can be easily found on the Internet. Grab a copy, study it and make sure you are being treated fairly by debt collectors. You do have rights and you need to know them.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.