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Credit Education > Debt Management Help > The Banks’ Move in Collecting Debts

The Banks’ Move in Collecting Debts

By Janet Lacey
Published: Friday, December 25th, 2009

After the great part that the credit crunch has played in the recent global financial recession, financial agencies which are directly affected by the crisis such as banks are doing everything they can do to make things meet the ends. One of the greatest and most laborious tasks that the banks in the whole United States have been doing is collecting the debts that made up the sector that made credit crunch a full swing financial crisis.

Just in July 0f 2008, an increase of 4.8% in the total debts was recorded by the Federal Reserve. This made managing debt for the Federal Reserve rise to $969.9 billion dollars. This increase is just a secondary increase that followed the already increasing debt account of Americans. It can also be attributed that these huge number of debt is primarily caused by credit card accounts.

The task of managing debt is not the sole task of banks and the Federal Reserve, individuals who opted to be a part of the borrowing process should be well aware of the consequences that their borrowing implies. In the first place, if borrowers would opt to pay their debt accounts past due date their credit report will be greatly affected by this late payment history account. Getting a 60 days, 90 days, 120 days of late payments is enough to make the borrower bear long years of lowered credit score and worsened report.

To answer this dilemma banks are exerting all efforts to collect pas due accounts. The main strategy of banks is to first collect past due accounts simply because the owners of these accounts have the greater probability to just wait for the account to be defaulted by the bank or to reach the out of statute date.

Many banks are now hiring professional collecting services from the mandated collection agencies from the Fair Credit Reporting Act or FCRA. This move to hire outsourced companies to help in their collection activities marked the start of the whole process of managing debt to put a stop in the recession’s credit crunch effect. These efforts are made to avoid the great tendency of credit card account holders to neglect payments but still use the accounts due to financial needs.

The great number of delinquent payers pushed major banks to start adapting a proactive way of dealing with credit card payments. Banks in line with their debt management plans are now giving new services to compensate for the difficulty of getting post recession payments through new communication techniques.

This new branch of banking makes it viable for indebted individuals to communicate with their banks for possible payment adjustments. A part of this communication strategy is banks giving out incentives. Many banks are now giving out incentives just for the reason of opening up the communication to the borrowers. Banks give out phone cards and company gifts to make the borrowers call back, not just to claim their gifts but to also start paying their debts. Managing debt for banks is proving to be a hard task especially after the global recession. These efforts will need time to see whether they can greatly help in the collection of these past due debts.    

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