Starting a business is something that a majority of Americans would love to do. As for the type of businesses you can start, the internet and technology have opened up a wide range of different possibilities. Some people want to open up a retail store, others want to sell a product online; the opportunities are truly endless.
However, one industry that is growing and becoming more popular as a business choice is debt collection. Debt collection agencies collect tens of billions of dollars each and every year. And with America’s consumer debt problem showing no signs of slowing down, debt collectors will be busy in the future.
Before you go starting a debt collection agency, there are a few things you need to think about and consider. In particular, this article is going to look at some legal considerations you need to make when creating your debt collection company.
Learn Debt Collection Laws
While technically anyone can start a debt collection agency, going at it completely blind to the laws and regulation is a good way to fail or be sued. Instead, you need to hit the books and the internet to learn and understand any debt collection laws you will need to abide by.
There are both federal and state laws that you need to learn, which are all about regulation how you can collect debts from both businesses and individuals. You will need to know about a variety of laws such as the Fair Credit Reporting Act, the Fair Debt Collections Practices Act and more.
You want to ensure that you have everything covered and are knowledgeable enough before starting the business. Consulting an attorney with knowledge in the space can be very valuable in making sure this is the case.
Obtain the Correct Licensing and Insurance
Even though you might be educated on the laws, that in itself isn’t enough to start up a debt collection company. Instead, you will need to get licensed and insured. Regulations vary from state to state, and not complying could lead to a lot of potential liability. You will want to speak with the authorities or search online to learn more about the licensing and insurance requirements in your area.
Once you are licensed and insured to protect yourself, you can start up your business. However, be aware that these regulations and requirements can change. Because of this, it is important to stay up to date on any changes or trends in the space. Constant education is important to ensure your business remains healthy, successful and compliant.
Find a Suitable Fee Structure
For you to run a successful business of any kind, you need to get paid. As a result, coming up with a fair and thought-out fee structure is an important consideration. There are a few different strategies you can take for how you charge. Some collectors get a commission, while others buy bad debt and collect the entire amount.
As for how much you charge, that will depend on a few factors. These include things like your experience and your success rate on collecting debts. Some people will also set a base rate and then tailor it depending on the client.
Either way, having a fee structure set out ahead of time is a good way to show professionalism. It will also help evade any liability if people claim you changed your fee on the fly or took more than you should have.
Hopefully this article has helped you make all the important legal considerations before starting a debt collection agency.
