Collection Agency

Collection agency summary:

• Collection agencies are businesses that collect unpaid debts.

• Unless they work for the original creditor, the collection agency has to follow the rules set forth in the Fair Debt Collection Practices Act.

• If you’re contacted by a collection agency, you have many rights. If you’re harassed, you could file a complaint against the collection agency.

Collection agency definition and meaning

Collection agencies collect unpaid debts they believe are owed to them or an original lender. While they have the right to contact consumers, most debt collectors must follow strict rules. 

Key concept:

When a collection agency contacts you, it's because it wants to collect money from you or someone you know. The Fair Debt Collection Practices Act (FDCPA) lays out rules that collection agencies have to follow. 

If you or a loved one has ever been pursued by debt collectors, you know it’s usually a high-stress situation. A solid understanding of your rights could help relieve that stress and help you get through it.

A collection agency is a business or department whose job it is to collect unpaid debts. Their relationship to the original creditor is a factor that affects their rights and your rights.

Many—but not all—debt collectors (including collection agencies) are held to a strict code of conduct outlined in the FDCPA. 

The rules apply to:

• Third-party debt collectors. People who are paid to collect money from you.

• Debt buyers. Debt buyers purchase outstanding debt from lenders and then have the right to try to collect on it. 

• Lawyers. Lawyers and law firms paid to collect debt on behalf of their clients.

• Original lender, pretending to be a third party. Any time a representative from the original lender uses another name or implies that they're working for a third-party collection agency, they're considered a debt collector and are subject to FDCPA rules. 

Not covered by FDCPA regulations:

• The original lender. When you’re contacted by a collection agency that’s employed by the original lender and they're upfront about who they are, FDCPA rules don't apply. Still, you do have rights. 

Collection agency: a comprehensive breakdown 

Many debt collectors are collection agencies (a separate company—not your original creditor—that earns money by collecting on debts). These are some of the rules that apply.  

What collection agencies ARE permitted to do

• Contact people you know. Debt collectors can contact your family, friends, neighbors, and co-workers, but only to find your contact information.

• Contact other parties involved. A third-party collection agency is allowed to contact attorneys involved in the case and, in some cases, may contact credit reporting agencies. 

What debt collectors are NOT permitted to do

• Contact you at unusual times. This typically means no calls before 8 a.m. or after 9 p.m.

• Use obscene or profane language. Collection agencies can't threaten or use violence.

• Contact you at work. If you've told them you can't receive calls at work, collection agencies aren't permitted to call you there. 

• Tell your friends or co-workers you're in debt.

• Abuse or harass you. A collection agency can’t imply that they're affiliated with the U.S. or state governments. They also can’t repeatedly call your phone.

Your rights

If a collection agency contacts you, and they aren’t the original creditor, keep these legal rights in mind. You have the right to:

• Verify the debt is legitimate

• Tell them to stop contacting you. Keep in mind that if you do this, it’ll be harder to negotiate a solution. The next time you hear from them might be a notice of a lawsuit against you.

• Consider your legal options

• Contact the Federal Trade Commission, Consumer Financial Protection Bureau, or your state attorney general’s office to lodge a complaint if the collection agency is breaking the rules laid out in the FDCPA. 

It's fair to say that a collection agency is just doing their job. However, there's a right and a wrong way to do that job, and you can make it easier on yourself by knowing your rights.