Which is an example of an alternative collection practice?

Which is an example of an alternative collection practice?

• A. Forbearance agreement.
• B. Lease termination.
• C. Credit default swap.
• D. Debt consolidation.

Answer: (A)

Alternative collection practices are strategies that help recover money by adjusting terms or providing relief to the borrower instead of using aggressive tactics. A forbearance agreement fits this approach because it temporarily pauses or reduces payments (and may waive some fees) to give the borrower time to get back on track, while preserving the lender’s potential to collect later. The other options don’t represent a modification or accommodation of the collection process: terminating a lease ends the agreement, a credit default swap is a risk-management instrument, and debt consolidation restructures multiple debts into one loan rather than serving as a collection tactic.

Alternative collection practices are strategies that help recover money by adjusting terms or providing relief to the borrower instead of using aggressive tactics. A forbearance agreement fits this approach because it temporarily pauses or reduces payments (and may waive some fees) to give the borrower time to get back on track, while preserving the lender’s potential to collect later. The other options don’t represent a modification or accommodation of the collection process: terminating a lease ends the agreement, a credit default swap is a risk-management instrument, and debt consolidation restructures multiple debts into one loan rather than serving as a collection tactic.