The World of Debt Collectors

What is a Debt?


Debt refers to something owed; usually assets owed, but the term can also encompass moral obligations and other interactions that do not revolve around money. In the case of assets or financial obligations, debt is a means of using future purchasing power in the present. As a result of this characteristic, many companies will use debt as a part of their overall business strategy.

Debt is created when a creditor (institution or individuals lending monies or assets) lends a sum of assets to a borrower. In American society and the majority of modern economic systems, debt is typically granted with an expected repayment schedule. In the majority of repayment plans, the borrower is responsible for repaying the debt in full, plus interest.


Before a debt can be solidified, both the borrower and the lender must agree on the manner in which the debt schedule will be satisfied. This payment plan is typically denominated as a sum of money, but can also be denominated in terms of goods or services. Repayment can be satisfied in increments or via a lump-sum payment at the end of the loan agreement.



What do Debt Collectors do?

When an individual fails to meet the repayment schedule of their loan or secured debt obligation (payments on a car or house) the creditor will contact the borrower to inform them of their current situation. If the borrower continually fails to make payments or pay-off the loan agreement the lender will utilize debt collectors—a third party agency that mediates and expedites the collection of a debt.

Debt collectors institute the debt collection process by contacting the borrower and informing them of their current situation. In most instances debt collectors will offer the individual a break and allow them to pay-off their debt for a reduced amount. The process is engaged when a lender hires a debt collector for an amount that is typically less than the loan or lending amount.


The idea is that the lender can hire debt collectors to collect the debt and assume their regular business without having to worry about hassling borrowers for repayment. In turn, the debt collectors assume the responsibility, for a payment, of collecting the debt. To expedite the collection process debt collectors will offer the repayment at a rate lower than what was originally agreed upon the loan agreement.


As a result of their function and the nature of the business, debt collectors are required to institute a collection process in accordance with the respective jurisdiction’s laws on debt collection. More specifically debt collectors must abide by the rules outlined in the Fair Debt Collection Practices Act, which specifically prohibits a debt collector from partaking in any harassing or vulgar means to collect a debt.