In early 2017, US household debt reached $12.73 trillion, surpassing the record set during the Great Recession.
But most businesses don’t have the resources to collect from debtors on their own. Instead, they rely on third-party agencies to do their dirty work. As a result, the American debt collection industry is currently thriving.
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Thanks to technology, it’s now easier than ever to learn how to become a debt collector. While you don’t need any degrees to do the job, you do need to put together a plan.
Read on to find out a few useful tips you can use to run a successful debt collection agency from home.
Learn the Laws and Regulations
When learning how to become a debt collector, you need to familiarize yourself with the gamut of laws related to debt collection. Otherwise, you open yourself up to lawsuits from debtors and penalties from the CFPB.
Here are a few specific laws you should pay close attention to:
- The Fair Debt Collection Practices Act
- The Fair Credit Reporting Act
- The Gramm-Leach-Bliley Act
These pieces of legislation should help you start building a foundation of knowledge. But you should spend an extensive time reading up on bankruptcy laws too.
Also, make sure you check your local regulations, as rules for running an agency can vary from state to state. Some states require a collections license, whereas others don’t. That said, you need to register your business not just on a local and state level, but on a federal level as well.
Consider Potential Salary and Costs
The average salary of a debt collector is approximately $32,500. However, this figure varies drastically by state.
Typically, there are two primary business models for debt collecting. The first involves purchasing debt outright. The second involves earning commission for the amount you collect for creditors.
If you’re working from home, you’ll most likely work on commission. In this case, startup and overhead costs are low. You only need a phone, computer, printer, file cabinets, and a desk.
Furthermore, consider that you need to cover the registration fees for your business.
Start Marketing Your Agency Early
Before marketing your agency, choose the types of debt you wish to focus on. This can help you narrow down your niche to anything from credit card debt to medical debt.
Of course, you should start with inbound marketing. Utilize SEO strategies to target businesses and attract debt settlement leads. Invest a lot of your efforts in heavy keyword research and content creation.
A good content strategy will take a few months to pay off. In the meantime, try cold calls and emails as well. Contact business owners near you to see if they need your services.
Final Thoughts on How to Become a Debt Collector
Debt collection can be a very lucrative online job. However, if you fail to familiarize yourself with laws and regulations, you’re going to run into walls. You may even find yourself facing financial penalties if you’re not careful.
Also, keep in mind debt collectors aren’t exactly well-liked. In fact, the CFPB received over 300,000 debt collection complaints since 2013. So prepare yourself for plenty of angry responses.
What do you think about working as a debt collector? Do you have any experience in the industry? Feel free to chime in with your thoughts in the comments section below.