What is a Collection Agency?

A collection agency is a company that, as the name implies, collects an owned debt. These companies act as agents of the creditor and attempt to collect debts owed, either in exchange for a flat fee or a percentage of the amount owed.

There are other agencies which actually buy the account that is in debt from the creditors. Once they have bought the account, the debtor no longer does business with the creditor and instead is now in a business relationship with the collections agency.

Sometimes a company will establish an internal collections agency - also referred to as a first-party agency - in order to collect debts owed. These are generally limited to larger companies that can afford to maintain an internal collections department.

Collections agencies are regulated in the United States. Most states require that an agency be licensed to collect debts on behalf of a third party. Also, collections agencies are governed by the Fair Debt Collection Practices Act. Among outlining a set of behaviors that the company must follow, it also guarantees that individuals can bring a lawsuit against the collections agency.

While we refer to the entity that collects debt as a collections agency, keep in mind that there are everyday people working behind the phones attempting to collect on that debt. And while they may seem cold and ruthless, chances are that if you talk to them and explain your situation they will more than likely help you out.

Also, keep in mind that debt collectors are people that generally work on a commission basis, and are generally highly motivated to collect the debt owed. This is can be an advantage to you, because they are more willing to help you pay off what you owe.

On a side note:

Some people have complained that some agencies harass and/or threaten debtors. In my experience, I have found that most collections agencies want to work with you, rather than against you. While I’ve had my fair share of phone calls and knocks at my front door, I’ve never been threatened or harassed.

[tags]collection agency, collections agencies[/tags]