Want to know what you’re talking about before you get in touch with a professional commercial collection agency? Get educated on the most common debt collection terms, language, and slang with this compendium. Consider this your master resource for all things debt collecting!
Debt Collecting Terms That Start With “A”
- Abusive Language: The use of profane, offensive, or insulting language to a debtor or third party when attempting to collect a debt. Abusive language is illegal and strictly prohibited by the Fair Debt Collection Practices Act (FDCPA).
- Account: The record of all information regarding an individual or company’s financial accounts, including past payments, current balances, and other relevant information.
- Accounts Payable: A record of all money owed by a company to its suppliers, vendors, or business partners.
- Accounts Receivable: A record of all money owed to a company by its customers.
- Accrued Interest: Interest that accumulates on debt over time until it is paid off.
- Administrator: A third-party debt collector hired to manage the collection of a company’s debts.
- Administration Order: A court order that sets the terms and conditions of a debt repayment plan.
- Arrears: Money that is overdue or past due.
- Audit: An examination of a company’s accounts and financial records to check the accuracy of its payments and collections.
Debt Collecting Terms That Start With “B”
- Bacs: A system used to transfer money electronically between banks.
- Bad Debt: A debt that is unlikely to be paid off in full.
- Bad Debt Relief: A form of tax relief that allows companies to write off a portion of their bad debt.
- Balance Sheet: A financial statement that lists a company’s assets, liabilities, and equity.
- Bankruptcy: A legal procedure whereby a debtor is declared insolvent and their assets are distributed to creditors.
- Better Business Bureau: A nonprofit organization that assists consumers in resolving disputes with businesses.
- Business Restructuring: The process of reorganizing a company’s operations to improve its financial position.
Debt Collecting Terms That Start With “C”
- Cash Flow: The amount of money coming in and out of a business.
- Cease Communication Letter: A letter sent to a debtor indicating that all future communication should be directed to the debt collector or attorney.
- Charge: A fee charged by a debt collector for their services.
- Collection: The process of attempting to collect a debt from a debtor. This can include contacting the debtor, negotiating payment arrangements, and taking legal action if necessary.
- Collection Fees: Fees charged by a collection agency for their services.
- Collection Letter: A letter sent to a debtor informing them that they owe money and requesting payment.
- Collector: A person or company responsible for collecting debts from debtors.
- Commercial Collection Agency: A company that specializes in collecting commercial debts from businesses.
- Contract: A legally binding agreement between two or more parties.
- Consumer Financial Protection Bureau (CFPB): A federal agency responsible for regulating consumer financial products and services, including debt collection.
- Contractual Fees: Fees charged as part of a contract between two or more parties.
- Credit: The process of obtaining goods or services in exchange for a promise to pay at a later date.
- Credit Fees: Fees charged for the use of credit, such as interest and late payment fees.
- Credit Report: A record of an individual’s credit history, including payments, defaults, and other financial activities.
- Credit Terms: The details of a credit agreement, such as the interest rate, payment terms, and repayment schedule.
- Creditor: A person or organization that is owed money by another person.
Debt Collecting Terms That Start With “D”
- Days Sales Outstanding (DSO): A financial ratio that measures the average number of days it takes to collect payments from customers.
- Debt: Money owed by one person to another, usually as a result of a loan or credit agreement.
- Debt Relief Order: A court order that allows an individual to have their debts frozen for up to a year, during which time they will not have to pay any interest or fees on those debts.
- Debt Restructuring: The process of renegotiating a debt with a creditor to lower the amount owed or extend the payment period.
- Debt Settlement: A process by which a debtor agrees to pay a portion of their debt to satisfy the entire amount owed.
- Debtor: Someone who owes money to a creditor.
- Default: When a debtor fails to make payments according to the terms of their loan agreement.
- Default Notice: A written notice sent to a debtor when they have failed to make payments according to the terms of their loan agreement.
- Delinquent: When a debtor fails to make payments on time.
- Dispute: When a debtor disagrees with the amount owed or the validity of a debt.
Debt Collecting Terms That Start With “E”
- Exempt Funds: Money that cannot be garnished from a debtor. This includes social security payments, supplemental security income (SSI), and certain other types of benefits.
- Exempt Income Protection Act: A federal law that protects debtors from having their wages or other income garnished.
Debt Collecting Terms That Start With “F”
- Factoring: A type of debt collection where a third-party company buys out a business’s debt at a discounted rate in exchange for immediate payment.
- Fair and Accurate Credit Transaction Act (FACTA): A federal law that protects consumers from identity theft and other forms of fraud.
- Fair Credit Reporting Act (FCRA): A federal law that governs the accuracy, fairness, and privacy of consumer credit reports.
- Fair Debt Collection Practices Act (FDCPA): A federal law that regulates the activities of debt collectors and protects consumers from unfair or abusive practices.
- Fake Debt: The practice of attempting to collect on a debt that is not owed and does not exist.
- Federal Trade Commission (FTC): The federal agency responsible for administering and enforcing laws related to consumer protection and fair debt collection practices.
- Forward Dating: The practice of placing a date on correspondence before it is sent out. This practice is illegal in many states, as it can be interpreted as an attempt to deceive the consumer into believing the correspondence was sent out earlier than it actually was.
- Fraud: The intentional act of deceiving a consumer for the purpose of obtaining their personal information or money.
Debt Collecting Terms That Start With “G”
- Garnishments: A legal action taken by creditors to collect a debt. It is usually done through a court order and requires the creditor to take a portion of the debtor’s wages or other assets to pay back the debt.
- Guarantees: A contractual agreement between two parties in which one party agrees to assume the financial responsibility for a debt incurred by the other party.
Debt Collecting Terms That Start With “H”
- Harassment: The act of making persistent, unwanted contact with a consumer to pressure them into paying off their debt. This can include frequent phone calls and letters as well as threats of legal action.
- Hearing: A legal proceeding where a judge will listen to arguments from both parties involved in the dispute and make a ruling. This is often used when the debtor has failed to pay the debt or when they are disputing the amount owed.
Debt Collecting Terms That Start With “I”
- Informal Arrangement: A payment plan set up between the debt collector and the debtor that does not involve legal action. The plan is informal in nature and based on an agreement between the two parties.
- Initial Writ: A document issued by the court that informs the debtor of their obligation to pay a debt and of the legal action that can be taken if they fail to do so.
- Insolvency: The inability of a debtor to pay their debts due to a lack of funds.
- Interest: A fee charged by a creditor to compensate them for the use of their money.
- Invoice: A document issued by a creditor to the debtor that details the amount of money owed and due.
- Itemization: A detailed listing of all individual items that make up a debt.
Debt Collecting Terms That Start With “L”
- Late Payment: A payment that is not made by the due date specified in the terms of the loan.
- Letter Before Action (LBA): A legal letter sent by a creditor to the debtor informing them of their debt and demanding payment.
- Limited English Proficient: A person who does not speak English fluently and is therefore unable to effectively communicate with debt collectors.
- Liquidation: The process of converting a debtor’s assets into cash to pay off their debt.
- Liquidator: A person or company appointed to manage the liquidation of a debtor’s assets.
Debt Collecting Terms That Start With “M”
- Mini-Miranda Warning: A statement given by a debt collector to a debtor informing them of their rights under the Fair Debt Collection Practices Act.
- Misrepresentation: Making false or misleading statements to a debtor to collect a debt.
Debt Collecting Terms That Start With “N”
- Nominee: A third party appointed to receive payment from a debtor on behalf of a creditor.
- Non-Recourse Facility: A type of loan facility in which the lender has limited or no recourse against the borrower, typically in cases where the collateral is of greater value than the amount of debt being borrowed.
Debt Collecting Terms That Start With “O”
- Order-to-Collections Process: A process whereby a creditor assigns an account to a third-party debt collector. The debt collector then sends out a collection letter and attempts to contact the debtor to collect the debt.
- Original Creditor: The creditor who initially extended credit or services to the debtor.
- Outstanding Balance: The amount of money the debtor still owes to the creditor after all payments have been made.
Debt Collecting Terms That Start With “P”
- Party/Parties: A person or entity involved in a legal transaction.
- Payday Loans: Short-term loans often used as a last resort by consumers who cannot get access to more traditional forms of credit.
- Phantom Debt: Debt that the debtor does not owe but is being claimed by the debt collector.
- Pleadings: Documents filed in a court of law that outline the parties’ legal claims and defenses.
- Preferential Creditor: A creditor who is paid out first before other creditors in the event of a bankruptcy or liquidation.
- Principal: The amount of money originally borrowed, not including interest or fees.
- Proof of Debt: Documentation used to prove that a debt exists and must be paid.
- Proof of Delivery: Documentation that confirms a debt collection letter was sent to the debtor.
- Proxy: A person who is authorized to act on behalf of another person.
- Proxyholder: A person appointed to act on behalf of another in debt collection matters.
Debt Collecting Terms That Start With “R”
- Receiver: A person appointed by a court or other authorized party to take control of, manage, and administer the assets of a debtor.
- Receivership: A court or other authorized party action to appoint a receiver to take control of, manage, and administer the assets of a debtor.
Debt Collecting Terms That Start With “S”
- Sales Ledger: A list of all outstanding debts owed to a company.
- Secured Creditor: A creditor who has security for their loan. The security can be in the form of a mortgage, charge, or pledge over assets or goods.
- Set-Aside Judgment: A set-aside judgment is a court order that allows a debtor to pay back the debt in installments over time as approved by the court.
- Settlement Agreement: A settlement agreement is an arrangement between a creditor and debtor that allows the creditor to receive less than the full amount of the debt in exchange for the debtor paying a lump sum.
- Small Claims: Small claims are court proceedings for collecting a small amount of money owed, typically up to $3,000.
- Statute of Limitations: A law that sets a time limit for creditors to collect on certain debts. After the statute of limitations has expired, creditors can no longer legally pursue collection of the debt.
- Statutory Demand: A formal request for payment of an undisputed debt. It is usually sent by a creditor to a debtor and can be used as evidence in court that the debt is owed.
- Substantiation of a Debt: The process of providing evidence that a debt is owed. This can include a copy of an invoice or statement showing the amount due and when it was incurred.
- Summary Clause: A provision in a contract that states the amount of money owed, the terms of payment, and any penalties for late payments.
- Summons: A legal document issued by a court or other authority that orders an individual to appear in court and answer a complaint.
Debt Collecting Terms That Start With “T”
- Time-Barred Debt: A debt that is past its statute of limitations and thus unenforceable in court.
- Token Payments: Small payments made by a debtor to show that they are trying to pay off their debt.
- Tradeline: A line of credit that appears on an individual’s credit report.
Debt Collecting Terms That Start With “U”
- Unsecured Creditor: A creditor that does not have the right to seize a debtor’s property in case of nonpayment.
Debt Collecting Terms That Start With “V”
- Validation Notice: A document sent by a debt collector to a debtor that contains information about the debt and the rights of the debtor.
- Verification of a Debt: The process of confirming the accuracy of a debt and its associated information.
Debt Collecting Terms That Start With “Y”
- Year-End Closing: The process of finalizing a company’s financial statements at the end of their fiscal year. This includes reconciling accounts, preparing financial statements, and other duties related to closing out the books.
Debt Collecting Terms That Start With “Z”
- Zombie Debt: A debt that has been sold or transferred to a third-party collections agency after it was written off by the original creditor. It is also referred to as time-barred debt because it is usually past the statute of limitations.
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