An act is a piece of legislation. In the business world, it protects the rights of both the creditor and the debtor. The law should protect the debtor and at the same time provide for legal ways through which a creditor can recover his or her money. Debt collection can sometimes be a difficult process and therefore good legislation has to be in place to protect the parties involved.
Countries that have collection agencies have laws that govern the agencies and prohibit them from abusive practices. Some of the collection agencies are subsidiaries of the companies that own the original debt and therefore they are referred to as ‘first party agencies’. They are part of the first party to the contract, that is, the creditors. The second party is the debtor
In the United States for example, thirty party collection agencies are subject to the Fair Debt Collection Practices Act of 1977. This legislation protects both the debtor and the creditor. It prohibits communication of a debt to a third party because the original contract is normally between a debtor and a creditor. Third party agencies are normally not part of the original contract. It also limits the hours during which an agency can call a debtor. It also prohibits false and deceptive representations. Agencies are also prohibited from making any threats of action against a debtor.
The United Kingdom has no specific legislation on debt collection but for any third party agency to operate, it must have a consumer credit license as per the Consumer Credit Act of 1974. Also, for a third party collection agency to retain its license, it must work within the framework of fair debt collection guidance that was outlined in 2003.
Mercy Maranga writes content on Finance and Debt Management. Visit her site here for more information on Finance and how to effectively Manage your debts.
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