Rene Wright
Scholarship Essay
It is extremely important to know how to responsibly manage your money. Ten million adults report being late or missing a mortgage payment in the last year, and many more have serious difficulties paying bills each month, according to the National Foundation for Credit Counseling (NFCC). Many people know where their money goes each month, but others keep little or no track at all of their typical monthly expenses. A majority of the public spends more money than they earn, and are piling on the credit card debt, paying large interest rates.

It is my opinion that teenagers don’t learn to manage money before they get their first real job. Our parents and our teachers need to invest more time in education children on the basics of money management, the various savings accounts, checking accounts, and other types of money investments. I feel classes in money management and basic economics should be requires in high school and college. My high school plans to make these classes part of the graduation requirements but at the present time they do not require students to take money management courses. Students don’t understand the skills needed to manage their money and can make bad decision that could lead to financial trouble. I don’t believe many of my classmates realize that a collection agency is a business that pursues payments on debts owed by individuals and businesses.

I have friends from other high schools that are taking personal finance courses because their schools make it a requirement. They are taught about the credit industry and learn banking and investing skills from experienced bankers that are invited to speak in the classes. Credit counselors should be involved in teaching teenagers information on managing their personal finances. Without any opportunities to learn financial skills, my generation could end up in debt very easily. We need to avoid this by learning the importance of having a sufficient monetary emergency fund, how to avoid bankruptcy, and why we need to pay bills on time to avoid calls from collection agencies.

It would even been good to learn from young adults that had trouble managing their money and got into financial trouble with out of control credit card spending. They could explain what a credit score is and why it is so important, especially when you plan to take out a loan for purchasing your first home. Very few of my friends have a checking or savings account which means they will soon be out of high school with little knowledge of what to do when they live and their own and have bills to pay.

Credit card companies could give seminars in high school, rather then just mailing credit card applications to high school students. Many adults set bad examples by over-spending. If students are taught effective money management tools they can learn to avoid bad habits when they’re on their own and must accountable for their financial decisions. A credit card is easy to obtain and just as easy to abuse and quickly get into credit card debt. We need to learn how to properly use credit cards and establish a spending budget. There is a lot to learn about credit cards and it makes good sense to teach students before they have their first credit card.

 

The Value of Collection Agencies

Often times businesses allow the extension of credit for products and services offered. Many times these credit extensions become delinquent or past due. In order for these businesses to focus on their non delinquent or current accounts, they often times employ companies that specifically deal with these past due accounts. These companies that are referred to as professional debt collection services are a valuable asset to the financial health of the business as well as the economy in general.
So who extends credit? Businesses such as medical treatment facilities (i.e. hospitals, medical clinics, doctors); home repair services (i.e. heating and air conditioning, pest control, roofing); student loans (i.e. tuition, incidental fees); rental property (i.e. housing, storage units, equipment); as well as the banking industry, (i.e. home loans, car loans, credit cards) are examples. It is bills such as these that often time become delinquent.
When does an account become delinquent? An account becomes delinquent because the account holder does not pay his/her bill on time. If a business requires the payment to be made within 30 days of the office visit, or whatever the services may be, and for some reason it goes unpaid within the specified time frame; the account then becomes a delinquent account.
Why does an account become delinquent? An account becomes delinquent for many reasons. Some people do not have the money to pay their bills, losing a job can be a factor. A huge factor to not paying bill is when people get hit up with enormous medical bills when they least expect it. Some people are overextended, which means they spend more money than they actually make. For other their way of paying for their bills is to not pay for them at all. All of these sorts of people can really hurt a business in the long run. That is the time when an account would be sent to a professional debt collection service.
What is a professional collection service? According to ACA International, a not-for-profit trade association for professional businesses and individuals in the credit and collection industry, a professional debt collection service is a third-party collection service that collects on past-due accounts. These accounts are referred to them by various credit grantors-credit card issuers, banks, car dealers, retail stores, and healthcare facilities-any business that extends credit or offers payment installment plans.
What do businesses do if a person doesn’t pay? According to Bill Bland, owner of General Accounts Services, a collection agency, a credit grantor would normally review the account to see if there is a dispute, i.e. merchandise, etc, then if there isn’t they would most likely send them a final demand letter, if it goes unpaid, or the consumer doesn’t pay, then it would go to a collection agency.
What techniques do they employ? According to Bill, the techniques that agencies generally use to recover money is as follows: 1.) If the agency had no contact with a consumer debtor within the first five days the agency must send out a notice to advise them that their account has been placed with that particular collection agency; 2.) The agency waits consumer to respond. Some agencies use seven days and some use ten to fourteen days for a response that usually depends on the agency itself; 3.) If the agency doesn’t receive a response, then the account is assigned to a collector, and then it is followed up by phone calls, letters, etc. This is the process that Bill says many agencies commonly use. If the consumer refuses to pay in the first 30 days, they may place it on the individuals credit file. Some agencies may even recommend litigation and refer the account to an attorney.
How do businesses choose the right collection agency? There are several factors that businesses consider when choosing the right collection agency, they are the following: Price, percent of recovery, rate of recovery, and whether or not they have high ethical standards by adhering to the Fair Debt Collection Practices Act (FDCPA), a Federal law that governs the collection industry as well as protects consumers from unethical collection techniques. Holding membership to an organization such as ACA International, which requires members to maintain high ethical standards by following the FDCPA, is also something that the majority of businesses consider.
Bill was on the Board of Directors at the time the FDCPA came into play, which was passed on March 20, 1978. The Board of Directors committee was doing an investigation on finance companies and they had a big push on consumer protection. This push is what Bill feels got the law started. ACA International had a choice to fight or to let it go and Bill, being on the committee, made the choice to fight for it. He feels like it is a good law (Bland, Bill).
How is the agency paid? Collection agencies make their money usually by commission which means that they share a percentage of the money they collect, or in other words payment is contingent upon collection if no money is collected there is no fee paid. For instance, if the collection agency is trying to collect for a medical doctor and the bill is for $50, the collection agency might make about 25%, which is $12.50, of that money collected. The other 75%, which is $37.50, would go to the medical doctor.
Unfortunately if the collectors cannot get through to the account holders then there is a problem. The problem is that the more accounts that go unpaid, the more money those businesses do not make. It is a very risky problem because that is how businesses and organizations go out of business. The faster they get their accounts to collections, the faster the collectors can call those account holders. The faster the collectors can call the account holders, increases the businesses’ chances of getting their money back that much quicker.
In order for a business to stay in operation they have to deal with accounts receivables. Accounts receivables are when businesses collect money from their customers. They do not have time to deal with past accounts; they mainly focus on new and incoming accounts in order to stay in business. Because they do not deal with those past accounts, they then send them to a collection agency in hopes to get any money back. Sometimes they are in luck and other times they are not. It all depends on who the collection agencies are dealing with. Some people cooperate and others do not.
Why do businesses need collection agencies? Like I mentioned earlier, most accounts are referred for collections because they have gone unpaid for several months. Without the quick actions of collection services, unpaid debt is often reflected by higher consumer prices. Since there is a limit on how high prices can be increased before businesses begin losing customers, bad debt also results in business failure and job loss (ACA International). Why is value so important? It does not just have an effect on the economy but also on consumers. Consumers play an important role in the value of collection agencies. According to the ACA International Survey and Analysis, the average per household savings attributable to third-party debt returned to creditors translates into approximately 19 bags of groceries, 129 days of electricity, or 155 gallons of gas. That is a lot of stuff. That just shows you how much collection agencies can really save. That is why it is so important for businesses to send those delinquent accounts to collections as soon as possible so those numbers can increase even more. It is also important for customers to pay their bills on time. It some situations it can be very difficult for a person who does not have much money to pay their bills on time, especially if they are not expecting them to be so high. But again, the more money that is lost through businesses the higher the chances of job loss. The industry benefits the economy by recovering billions of dollars in delinquent debt each year that would other wise go uncollected. ACA asked a company to do a survey in 2006 and that company discovered that in 2005 the industry’s collection efforts resulted in 39.3 billion dollars of debt being returned to creditors on a commission basis.
When I had my interview with Bill, to him, the value of a collection agency to a business was the following: “Any business of any count has accounts receivables. Most times a lot of those go delinquent. The collection agency is a third party and as a professional industry have the knowledge, skills, and tools, to motivate the consumer debtor to pay the bill. There’s an old saying ‘ a credit grantor whether it be a doctor, etc, doesn’t always have the time to chase the bad money’ our job is to recover that so called “bad money” and put it back into the economy. That is what Bill feels is the value of a collection agency to a business as well as to consumers and our economy as a whole.
Businesses as well as the economy and consumers need collection agencies to help keep the businesses financially sound. If collection agencies were not here then all those delinquent accounts could go uncollected which would mean those businesses would never see the money. They are a huge asset to the business world. If there were no collection agencies it is possible that there would be limited businesses such as doctors or firms that provide home loans or rental property, thus causing fewer competition and higher prices. People could continue to not pay their bills and eventually the numbers that do no pay their bills could out weigh the numbers that do.
In conclusion knowing what a collection agency is and knowing how they operate is the first step to knowing why a collection agency is so important. They help immensely with money recovery as well as helping consumers and the economy grow as a whole. They have helped save a ton of businesses from losing money which clearly shows that they are a valuable tool to encouraging us as consumers to pay our bills.

Works Cited

“About ACA International.” ACA International: the Associaton of Credit and Collection
Professionals. 2007. ACA International. 16 Oct. 2007 http://acainternational.org
Bland, Bill. Telephone interview. 9 Nov. 2007.
“Collection Agency FAQ.” CardReport. 2005. 28 Oct. 2007 www.cardreport.com
“Value of Third-Party Debt Collection to the U.S. Economy: Survey and Analysis.” ACA International. 27 June 2006. National Economic Consulting. 28 Oct. 2007 .
Vaught, Dawn L. Personal interview. 15. Sept. 2007.