Collections & Recovery Strategies Flashcards

Under the Fair Debt Collection Practices Act (FDCPA), how many times may a debt collector call a consumer in a seven-day period regarding a specific debt?

Answer: Once

The FDCPA's 2021 rule limits collectors to one call per debt per seven-day period to prevent harassment.

Which collection strategy involves selling a portfolio of delinquent accounts to a third-party buyer at a discount?

Answer: Debt sale

A debt sale permanently transfers ownership of the accounts to a debt buyer for a lump-sum price below face value.

A consumer submits a written dispute within 30 days of receiving an initial validation notice. What must the collector do?

Answer: Cease collection activity until verification is provided

Upon written dispute, the FDCPA requires the collector to cease collection and mail verification before resuming.

In skip tracing, what is the PRIMARY purpose of using address verification services?

Answer: To locate a debtor who has moved without leaving contact information

Skip tracing uses address and contact databases to locate debtors who have relocated and are difficult to reach.

Which metric best measures the efficiency of a collections department's recovery efforts?

Answer: Recovery Rate

Recovery rate — the percentage of delinquent balances actually collected — directly measures collections effectiveness.

A debtor proposes to pay 60% of the outstanding balance as full settlement. This arrangement is best described as:

Answer: A compromise settlement

A compromise settlement (or lump-sum settlement) accepts less than the full balance owed to close the account.

Which legal remedy allows a creditor to intercept a portion of a debtor's wages directly from the employer after obtaining a court judgment?

Answer: Wage garnishment

Wage garnishment is a post-judgment remedy directing the employer to withhold and remit a portion of earnings to the creditor.