What Is A Collection Agency?

What is a collection agency? There are two main types of collection agencies; traditional and medical collections. Some people hear the words "collection agency" and immediately single them out as the enemy....

Some people hear the words "collection agency" and immediately single them out as the enemy. A collection agency's job isn't easy, especially in these times, when caller ID's screen phone numbers for us so easily. For every person who has ever owed a debt, it may seem like there is a mysterious world of grouchy collectors picking up their phones and hassling you about your bills. However, the system is a lot more organized. Diane Wilkman, President and CEO of Springboard, a credit correction company, says there are actually different categories of collection agencies.

"There are two main types of collection agencies. The traditional contingency type collection agency is one that a medical office or credit card issuer or any business can hire to collect their bills. It makes a lot of business sense to do so. It can be cheaper. Then, there are new types of collection agencies; they are debt buyers who actually own the debt. They are not working for anybody else. They bought the debt themselves for a few cents on the dollar. So they go about trying to collect for themselves," Wilkman says.

Medical collections are a big field. Wilkman says you have to be careful with these companies because many times information gets distorted between the hospital and your insurance provider. This is a very common mistake.

"Medical collections are a really big field, and we certainly advise people to look at their medical bills because they are notorious for having inaccuracies, especially hospital bills. They are very hard to understand sometimes. People should not assume the insurance company will take care of them, and that's why a lot of people end up going to collections. They think the insurance company is going to take care of something and they haven't," Wilkman says.

From medical care, all kinds of issues can arise. Many times bills can be outright confusing and complicated. Wilkman suggest paying close attention to all your medical bills. This way, if there are any errors, you can stop them as quickly as they start. Wilkman says she's seen all kinds of situations take place with medical bills.

"The ambulance company will bill you. The anesthesiologist will bill you; all these different parts will bill you separately. It is very confusing; medical bills are confusing collections issues. You start getting written notices and telephone calls from the collection agency. They will want to either set you up on a payment plan or get the full amount upfront or arrange a settlement," Wilkman says.

In the end, Wilkman says collection agencies have a reason for doing what they do. They wouldn't exist if people simply would just pay up. On the other hand, that doesn't mean collection agencies always have their information right. As a consumer, you have to be on guard about any possible mix-ups. The last thing you need is for an error to tag itself to your credit report and affect your credit score.

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