Collection Procedures Manuals
Collection procedures usually consist of a set of in-house company policies that are written in a manual or guidebook of some kind, though smaller companies may not have a manual. Usually, law firms that engage in collection practices will have manuals and training classes for their employees before they make their first collection call to a debtor. Most of the time, large corporations and small companies have a collection manager or collection department that will go through certain "housekeeping" procedures before an unpaid debt is turned over to a lawyer.
Laws and Regulations
The laws that cover collection policies and procedures are mandated by federal and state governments. On the federal level, the Federal Trade Commission regulates what is called the Fair Debt Collection Practices Act (FDCPA). In the case of a conflict between state and federal law, federal law prevails. Those who extend credit to others should be aware of the legal rules about how to collect money that is past due, particularly as those rules apply to bankruptcy. Special federal laws are in place for debtors who file for consumer protection under bankruptcy law.
General Housekeeping Procedures
How collections are handled vary from company to company, but there is a set of hard and fast rules that are typically dictated by the FDCPA, as noted above. Debts covered under that act include personal, family, household, credit card, auto loan, medical, and mortgage debts. They do not include business debts (which are handled differently), and also do not typically cover debts incurred by the non-payment of student loans, spousal support, child support, or personal income or property taxes. Certain types of federal benefits typically cannot be garnished in collections, but they can be in the case of the latter items that do not pertain to business losses. With businesses, a whole different set of policies and procedures apply---including how to handle businesses that file bankruptcy.
Violations of Debt Collection Practices and Procedures
According to the Federal Trade Commission (FTC), you have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, a judge can require the collector to pay you provable damages suffered because of illegal collection practices. They can also be required to pay you up to $1,000 even if you can't prove actual damages, as a punishment of sorts. You may also be reimbursed for your attorney's fees and court costs. This does not exempt you from paying the debt, but it does serve as a fine for the acts and behavior of the debt collector.
Penalties and Fees
Additional costs incurred by a collection agency or manager may include compounded daily or monthly interest up to a maximum amount allowed by law. Any amount above this is legally considered "usurious" -- or excessive, and will not be allowed. These fees can include court costs, attorney's fees, and "special" penalties that are within your own state's guidelines. Check with your state for additional information as to what can and cannot be charged, in addition to the debt owed.