Recent estimates suggest that global citizens and governments owe a collective $226 trillion. With all that debt floating around out there, someone is making a profit off of it. And, it could be you this year if you decide to open your very own debt collection agency.
Debt collecting agencies are subject to strict rules, though. You can’t expect debtors to hand over their money if they aren’t sure you’re legitimate.
Different states also have different regulations you need to follow. Otherwise, you could face fines, closure, or even criminal charges! Read on to learn more about different licensing requirements in different areas.
Understanding Licensing Requirements
First thing’s first — if you want to set up a collection agency, you need to know your state’s laws. As it stands, there’s no federal law requiring collectors to get a special license. Many states have passed their own laws, though.
34 states currently license collection agencies. If you live in one of those states, you’ll need to hire a licensing service to help you establish your agency. Licensing services give your business authority and help you remain compliant.
16 states do not currently make collection agencies get a license. New laws get passed every day, though, so you’ll need to keep up with the latest regulations if you live in these areas.
Next, you’ll need to research whether you need to take out a business license.
Debt Collection: How the Process Works
Once you’ve got the legal aspects of debt collections taken care of, it’s on to the good stuff. Now, you’ll need to decide how to make your money off of other people’s debts.
There are a few strategies you could use here. One common option is to buy old delinquent debts from others. Then, you’ll attempt to collect on that debt.
You could also buy delinquent debt and then resell it to others. Further, you could even outsource the debt collections aspect if you don’t want to deal with that part.
If you do handle collections yourself, you need to make sure you’re compliant with the law. Have a lawyer overlook your script to ensure it upholds debtors’ rights.
Is Debt Collecting Profitable?
So, is collecting debt profitable?
The answer is ‘yes’ if you’re willing to work for it.
Of course, it won’t be easy, though, as those debts are already delinquent for a reason.
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Debt Collecting Agencies: Are They a Good Business Idea?
So, are debt collection agencies a good business idea? In 2022, it sure is! Not only can you earn a good profit but you can also work from home during this ongoing pandemic. Of course, setting up a business will still take time, effort, and research.
Know more about Commercial Debt Collection at this site.
Make sure you understand the law in your state. If you still have questions, consult with a business attorney.
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