If for some reason your cash advance debt went into default far enough to be sold to a collection’s agency, there are some proper ways to work with them. The more you understand how collectors work, the better prepared you will be to handle communication with them. There are three ways a direct lender or creditor can collect on bad debt: soft collections, hard collections or through a collection attorney.
Many cash advance companies have their own “soft” collection practices
What are soft collections? Some companies employ their won collectors. These employees work at collecting defaulted debt. They can work with a debtor to finalize a payoff plan. Soft collections will usually only be used in the first 180 days after the debt has been defaulted upon. Ultimately, the creditor will like the customer to repay their debt and not lose money. Since the debt has not yet been sent off to hard collections, these collectors can use that next step as leverage for prompt payments.
Next step, hard collections. Once a company has been unsuccessful in collecting the debt, they can either hire a collections agency to represent them or sell the debt to an agency. When the collector has been retained, the agency will work on behalf of the creditor and will be compensated by earning a percentage of the total amount collected. When successful, this type of agent will collect from 25%-50% of the debt amount recovered. Selling debt to an agency, the credit will be paid up front for a negotiated amount per dollar of debt. Now that the agency owns your debt, the creditor is no long involved and this company will keep 100% of what is collected.
Depending on the creditor and the size of debt, some creditors will hire a collection attorney to collect the bad debt. After a few correspondences, the lawyer may end up processing the debt through the courts. A judgment processed in the courts will end up being treated differently than typical collections. If not paid, wages are garnished and liens placed as collection opportunities. Your employer will be instructed to deduct a certain amount of each paycheck until the debt is paid off. A lien placed on property (usually a home or car) will be paid once the property is sold. Each year that passes the amount for the lien increases with interest. If you are summoned to court, do your best to get there, it will be your only chance to defend your case. Some people avoid going, but all it does is secure the judgment against you.
Since cash advance debt never gets reported to the credit agency until it falls into the hands of outside collectors, it would make the most sense to work with the company’s soft collections. Other creditors will have already reported late or missed payments to negatively affect your credit rating. When you have money troubles going bad, take that first step and communicate to your creditor or cash advance lender in order to save yourself from going down the collections road.
