I am not a lawyer, I am a judgment broker). This article is my opinion, based on my experience in California, and laws vary in each state. If you ever need legal advice or a strategy to use, please contact a lawyer.
While there are wide variations on how collection agencies work to recover money from debtors, now very few engage in the stereotypes of abuse that were more common many decades ago. While there are bad apples in every profession, most debt collectors are polite and reasonable, usually much more than the debtors are.
All collection agencies starts with a letter and/or a phone call, because:
1) A small percentage of debtors pay after they get first notice of the debt, as some will realize this is now serious.
2) It gives the debtor a chance to contest the debt and explain their side of the story, because once in a while, the debt is not legitimate. Some examples of this are if the debtor filed for bankruptcy protection, or a judgment against them has expired or was vacated.
3) Laws require that debtors be mailed full or mini “Miranda” wordings, informing them of their rights, how they can dispute the debt, how to contact a government agency, etc.
The mini Miranda, has words similar to “I am NAME, of this BUSINESS-NAME, a debt collector representing CREDITOR-NAME. Information obtained during the course of this call will be used for the purpose of collecting the debt.” Similar words must be included on all letters, and used in all phone conversations.
After some time has passed, usually 30 days, most collection agencies write or call again, until one of two things happen:
1) They succeed in “making friends with the debtor”, and work out a current or future payment plan. Once in a while, they will visit the debtor’s residence for a friendly face-to-face discussion.
2) The debtor informs them in writing to stop all communications. This is somewhat like telling a painful tooth to stop hurting, because it does not stop collection actions, and debtors will still receive all legal notices.
Sometimes a collection agency’s next step is putting the debt on the debtor’s credit report. Then more waiting, and if there is not a judgment yet, sometimes they sue the debtor to create a judgment. Having a judgment is the key to being able to request that a Sheriff levy the debtor’s assets.
After there is a judgment, most collection agencies use private investigators to find the debtor’s assets, and their lawyers to recover the judgment. Most collection agencies do not need to own your debt or judgment, because they work on their client’s behalf.
Sometimes a collection agency wants you to pay (e.g.) $450 to domesticate your judgment to where your judgment debtor has assets. You probably expected not to have to pay anything as everything was supposed to be pure contingency. They might tell you if you assign your judgment to them, your would not have to pay the $450. The reason is, for some reason, most states have laws that say when lawyers represent you on a contingency basis, you, their client still must pay the court filing fees, and certain other fees. In some cases, it does not matter what agreement you signed with a lawyer or a collection agency, the law is you must pay such fees.
The reason you have to pay the $450 is that the collection agency uses lawyers that represent you while recovering your judgment. If you assign your judgment to them, they will no longer be working on your behalf, so they can pay the fees.
Most collection agencies charge between 25% to 50% of what is recovered, depending on how new the debt is, how much is owed, and what fees they charge. At 50% there should be no upfront or any other costs, at 25% you should expect to pay some fees. Most collection agencies charge an upfront fee for unlawful detainer judgments.
A judgment broker knows the best collection agencies, and a judgment broker is easy to find with a web search.