Debt Collector

Debt Collector Meaning

Debt Collector is a person or agency engaged by a company for the recovery of its debt due on account of the sale of goods and services, which have exceeded the accepted payment terms.

Types of Debt Collector

They can be classified into the following types:

Types of debt collector

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#1 – Internal

Internal or first-party debt collectors are the persons who belong to the same company to whom the debt is due. The contract for recovery of the debt is allotted to the internal team of the company and not given to any outside party. These type of collectors are appointed when the debt is overdue for less period of time (say three to six months, but the same also depends on company policies)

#2 – Third-Party

These are external parties outsourced by the company for the recovery of its debt from its debtors. These types of collectors are paid fees on a percentage basis based on the recovery of the amount due. This means, in case the collector is unable to recover the amount, then no fees will be paid to him. Since these are external to the company, they will be less customer friendly to the debtors of the company, since they do not represent the company.

#3 – Debt Buyers

In case, collection attempts fail, a company may either file a suit against its debtor or sell its debt to some other party. Those persons or groups which purchase such debts are known as debt buyers.

Process of Debt Collection

When any debt recovery exceeds the due date, it becomes overdue. The first step towards recovery is to assign the recovery to the internal parties i.e. employees, who follow up with the customer for the recovery of the overdue amount and try to reach at negotiation for payment timelines. Usually, after six months of the debt becoming due, if the employees are unable to make recovery, then external debt collectors are appointed. They work on your behalf and reach your debtor directly. They carry out continuous communication with the customer and based on information provided to them and collected by them independently, they communicate with the client, for the recovery of the debt. They are paid fees if they are able to recover the debt. However, if the debt is in the stage of expected non-recovery (say after one year of debt becoming due), then the company may decide to write offWrite OffWrite off is the reduction in the value of the assets that were present in the books of accounts of the company on a particular period of time and are recorded as the accounting expense against the payment not received or the losses on the more such debtor in its book and sell the same to debt buyers. The debtor no longer continues to reflect in your accounts. The debt buyer may either negotiate for recovery or file a lawsuit against the person for the recovery of the amount. Continuous follow-up and negotiation is the basic process that is being followed for debt collection, failing which company may either sell its debt or file a legal suit.

Debt Collector

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Responsibilities of Debt Collector

It takes cares of the following responsibilities:

  • Keeping a record of the delegated accounts to track the overdue or outstanding accounts.
  • To design a plan for the recovery of outstanding debts.
  • Communicating with the debtors of the company for the recovery of the debt as per plan.
  • Following up with the debtors and establishing the least possible timeline for recovery, after establishing mutual consent.
  • Send proper communication to the debtors and asking for the current status of the payment.
  • Handle queries in relation to the debt collection.
  • Update the status of the recovery on a regular basis.
  • Communicating the status of recovery to the owner of the debt.
  • Taking necessary legal action in case the recovery becomes problematic.

Qualification & Skills

There are no fixed criteria for qualification. However, graduates with accounts payableAccounts PayableAccounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting more, receivable or finance backgrounds are preferred with good inter-personal skills.

As far as the skills are concerned, they are required to possess the following skills:

  • Good communication skills
  • Legal knowledge
  • Computer skills
  • Practical experience
  • Negotiating skills
  • Knowledge of multiple languages
  • Decision making
  • Tactful
  • Strategic to difficult situations

Debt Collection Laws

A debt collector, during the process of debt collection, is free to contact the debtor of the company by any mode like email, phone, fax, etc. However, they should ensure compliance with the Fair Debt Collection Practices Act, which lays down the following rules to be followed:

  • They shall not disclose the details of debt due to any of the friends or family members.
  • The limit on the number of calls per day shall be followed strictly.
  • In no situation, they shall resort to abuses or threats.
  • Collectors are required to verify the debts before they proceed for their recovery.
  • The Act provides a remedy to those customers who wish to stop any communication from the debt collectors.


Debt Collection is a tough task that needs strong interpersonal skills and experience in the recovery field. When a company fails to make the recovery, it hires the external agents. Before proceeding for the debt collection, a collector shall ensure the genuineness of the debt and carry an independent analysis, otherwise, it may turn to be a financial struggle for the collector.

Recommended Articles

This has been a guide to Debt Collector and its meaning. Here we discuss the process, qualifications, responsibilities of debt collectors along with its types. You can learn more about finance from the following articles –