Collections Agencies: Companies That Track Down Debtors and Collect Debts
What is a Collections Agency?
A collection agency is a business that pursues payments on debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed.
Private investigators sometimes offer collection agency services due to their skills in tracking down people. If you’re thinking about providing collection agency services, be sure to educate yourself on the requirements and state laws.
There are many types of collection agencies, beginning with first-party collection agencies who are often subsidiaries of the original company to which the debt is owed. Third-party collection agencies are separate companies contracted by a company to then collect the debts on their behalf, usually for a fee. Another growing industry is debt buyers, in which the collections agency purchases the debt at a fraction of its initial value then attempts to collect upon it. Each country has their own rules and regulations regarding collection agencies and their practices, which are quite often very aggressive.
Industry Associations and Foundations
- American Collectors Association – ACA International (ACA), the Association of Credit and Collection Professionals, is the comprehensive, knowledge-based resource for success in the credit and collection industry. Founded in 1939, ACA brings together more than 5,500 members worldwide, including third-party collection agencies, asset buyers, attorneys, creditors and vendor affiliates. ACA establishes ethical standards, produces a wide variety of products, services and publications, and articulates the value of the credit and collection industry to businesses, policymakers and consumers.
- Commercial Collection Agency Association – The Commercial Collection Agency Association. Include the collection agency code of ethics, profiles, links, free literature, news and surveys.
- Commercial Law League of America – North America’s leading organization of collections, creditors’ rights and bankruptcy professionals. Legislative news on collections and credit reporting.
- Consumer Data Industry Association – Industry information and statistical research.
There are three reporting agencies that considered to be the “big three” in the industry. They are Equifax, Experian and TransUnion. Each of the big three reporting agencies provide consumers with access to their credit report and also provide a wide range of other services to consumers and businesses. Visit their website for more information.
Laws & Regulations
The main law that pertains to this areas is the Fair Debt Collection Practices Act. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you. Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them.
Acronyms related to the collections industry:
Following are some of the more common acronyms related to this area. As a private detective, it is important to be able to speak the language if you plan to offer these services to your clients.
- ABA – American Bankers Association
- ABI – American Bankruptcy Institute
- CCAA – Commercial Collection Agency Association
- FDIC – Federal Deposit Insurance Corporation
- FTC – Federal Trade Commission
- MBA – Mortgage Bankers Association
- NFCC – National Federation of Credit Counselors
Collection Agency Books – Books that explain how to start your own collections agency, or how to get an agency off your back.
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