Collection Agency

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Collection Agency

Collection Agency is an entity that is used by the lenders for recovering their past unpaid debts. These agencies are hired only after the lender has made several attempts to recover their debts, but has failed. A lot of lending companies have their own collection agencies or have subsidiaries that act as the same.

How does Collection Agency Work?

Debt collection agencies have certain tools to track the debtor’s location. They have various strategies through which they come to meet the debtor in person or contact him/ her over phones, etc. They can contact the borrower’s family, friends and employers to ask and gather information about him/ her, without disclosing them the reason for contacting. On successful recovery of the amount from the debtor, the loan lender pays the collection agency with a definite percentage of the recovered amount.

Collection Agency
Guidelines for the Collection Agencies

The debt collection agencies are regulated both by the state and federal laws such as the Fair Debt Collection Practices Act. These laws protect the debtors and have set some guidelines that every collection agency have to abide. Some of them are mentioned below: -

  • Debtors cannot be contacted at any unusual places such as funerals, etc.
  • The collectors are bound to give their names and the creditor if the borrower specifically asks about that.
  • They are not allowed to call the debtors outside the fixed time frame of 8 am to 9 pm.
  • The collectors cannot use abusive languages or threat the borrowers in order to recover the money from them.


1. Investopedia

2. Wikipedia



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