Sometimes, DCA’s are called third-party debt collectors as they take over the collection efforts from the original creditors after they have tried and failed to collect the debt themselves. The debt collection agency will then take a percentage of the amount recovered.
Another way that debt collection agencies work is to buy the debt from creditors at below the amount owed and then recoup a greater amount from debtors. That way, the initial creditors recover some of the debt and the DCA takes the burden of the collections. Some debt collection agencies specialise in specific types of debt.
As a customer, it is important to know your rights and obligations as well as the regulations governing debt collection agencies. This protects both the customer and the company as they go through the debt collection process.
To make the debt collection process as efficient as possible, collection agencies use debt collection software to automate as much of the customer engagement as possible. Conversational AI messaging across multiple channels is particularly effective as you can have two-way conversations with customers in a non-threatening way that delivers on all the metrics like response rate and debt recovery.