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Difference Between First Party debt Collection and Third Party Debt Collection

First party collections are the collection in which a company employs it, its own employees, usually from the accounts departments. These employees need to collect bad debts.

On the other hand, third-party collections are collections handled by a debt recovery agency. The collectors are from outside the organization.

In this blog, we will learn about both types of collection parties and how they can benefit your business.

First Party Debt Collections

There is an account receivable department in every business with its way of handling bad debts or loans. Depending on your company's size and structure, you may prefer to make a few phone calls and finally write off the account as bad debt. Big organizations may have their in-house debt collection group within the accounts receivable department. The in-house or first-party collections team will strive to get before a specified time, such as year-end, before marking it off as bad debt.  Advantages of first-party collections to the original creditor are:

  • Received full 100% of what is collected
  • Restriction of the tone while communicating with the client.
  • Sustaining or restoration of the client connection.

Third Party Debt Collections 

When an account has been marked-off or written off as bad debt, it has been considered either delinquent, or the original creditor's a bad loan. After that, for recovering the amount, creditors will assign the account to a third-party agency.  Advantages of third party collections to the primary creditor are:

  • No need to pay the fees unless the agency collects the amount.
  • The creditor can focus on other tasks while the debt is being collected
  • Expertise and effectiveness of professional collections agents
  • Increased chances of recovery of debt that was assumed bad debts

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