Are you a business involved in some capacity with debt collection, or dedicated to it? If there is any chance at all that you will have to recover debts, you should know about debt collection licenses.
Another certainty that you could add to the list along with death and taxes is debt. Debt has been increasing since 2007, by almost 40%. Chances are that this is either already a concern for you, or relates to your business.
Before you start making the rounds to collect a debt, you’ll need to obtain the previously mentioned license. Debt collection is already regarded as a messy business, so it’s best to do it clean and legal.
Understanding What a Debt Collection License Is
As the name implies, a debt collection license is a legal document that gives you the right to collect debts. There is no magic bit of paper that applies across all states. Instead, you will require a license for each state.
Another common misconception is the nature of the license. It does not give you free rein to run your debt collection however you wish. As each state requires its license, each state also has a specific set of rules.
Those rules are typically variations, such as requiring an office in the state.
Read about more- Need help with debt collection strategies? You can seek debt advice from professionals.
What Does a License Allow You to Do?
Other than the obvious of allowing debt collectors to collect a debt a license gives you access to a few things.
For example, if positioned as a credit collection service, it allows buying debts. An agency engaging in this will have access to bundled accounts of debt.
Having a license means you may legally bid on auctions of those bundled accounts.
Adding to the Air of Authenticity
Over the years, being a debt recovery agency has become more and more stigmatized. Obtaining a license is clear proof that a collection agency is following all of the rules to the letter.
Having a license, and going down the correct legal channels, makes an agency far more official.
It’s not only for appearances, either. There will be times when the legality of a collection is called into question. Situations like those are where a license becomes invaluable.
How to Acquire a Debt Collection License
Acquiring a debt collection license isn’t a task hamstrung by too much red tape or hoops to jump through. It is, however, slightly complicated.
You will require a registered agent, certificates of authority, and collection bonds. There are plenty of services with a focus on the law that can assist in obtaining all the necessary materials.
If you’re interested, there is more information here for the budding debt collector.
Staying Out of Debt
In an ideal world, we would all be managing our finances well enough that debt was never a worry. We wouldn’t have to give any thought to a debt collection license.
We don’t live in an ideal world, though. So, if you want to help yourself stay out of any unnecessary financial or legal entanglements, read more of our blog. The business and legal sections will be sure to help!