The Evolution of Debt Collection

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When someone hears the term ‘debt collectors,’ it often brings about negative thoughts. Although the debt collection industry no longer depends on fear tactics, people typically think of someone trying to harass you for your money. This negative connotation of debt collecting stems from early in history when debtors were treated with malice. 

The history of debt collecting stands as an example of the evolution of human understanding, intelligence, and empathy. Debt collecting has become a process that is more focused on both the debtor and the creditor, rather than just one or the other.

Where It All Started

Debt has existed as long as people have had dues to pay, but when did commercial collections come about? Commercial collection agencies are focused on business to business debt, most commonly referred to as B2B debt. The earliest record of commercial debt collection was recorded in Ancient Babylon. In their society, they had laws in place to protect debtors rights but still allowed creditors to recover their delinquent accounts.

Debt collection can be found in the Hebrew Old Testament as well. There were laws placed upon creditors, such as not being able to charge interest. However, they could still enslave their debtor as a form of payment. Thankfully, this is an outdated practice. 

Early American Debt Collection

A prominent factor behind the English immigrating to America were the laws surrounding debtors. England took the perspective of the creditor needing assistance rather than the debtor. Debtors would be placed in debtor prisons where they were supplied with very little. They were unable to leave unless their debts were resolved. 

Once those who emigrated from England to North America arrived, they decided to take the opposite approach to debt. Rather than the creditor needing assistance, they took the perspective of the debtor needing assistance. Although debtor prisons still existed in early America, these new laws surrounding debt allowed more rights on behalf of the debtor.

During the formulation of the constitution, John Adams signed into law the first bankruptcy statute. This gave debtors the ability to free themselves from debtor prisons through giving up assets. Despite the improvements made, debt collection was still rooted in fear tactics and unethical treatment. Luckily as society has evolved, debt collection has become a respectable, ethical process. 

20th Century & On

Within the 20th century is where we start to see practices closer to modern day. Although punishments were still harsh, debtor prisons were no longer used. Instead, if payments were passed a certain deadline, the debtor’s possessions would be confiscated. There also began to be the use of telephones and automated systems.

In 1939, the American Collector’s Association was created to bring together 3rd party collection professionals to strengthen the debt recovery services industry. The ACA is still alive and well today. Additionally, the Fair Debt Collection Practice Act (FDCPA) was signed in 1977 to act as a guide to ethical practices for all collection agencies.

Today’s debt collecting practices have been enhanced through the increase in available technology, a better understanding of empathy, and legal guidelines. With better management information systems, collection agencies have easy ways of storing and accessing data. Humans have evolved to understand that there are civil, ethical ways of going about curing debt. One of those ways in particular is working with a collection agency that is specialized in resolving debt.

The debt collecting industry has come quite a ways. Debt collection agency don’t want to wreck your brand, they want to save your credit score and find the best debt recovery solution. Debt collecting today is rooted in empathy, ethics, and understanding.