Collection Agency

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DEFINITION of 'Collection Agency'

A company hired by lenders to recover funds that are past due or accounts that are in default. The lending company itself may also have a division or subsidiary that acts as its collection agency. A collection agency is often hired after a company has made multiple attempts to collect its receivables.

BREAKING DOWN 'Collection Agency'

A collection agency usually earns a percentage of the funds or assets it recovers for the lender. Some collection agencies will actually purchase the debts from the lender at a discount, in which case the collection agency receives the full amount of whatever owed funds it manages to collect. Unless a collection agency has won a lawsuit against a debtor, it can't legally seize assets from a debtor or physically harm or threaten a debtor to make payment.

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RELATED FAQS
  1. Which debts are covered under consumer protection laws?

    The most impactful consumer protection laws and regulations in the United States are overseen by the Federal Trade Commission, ... Read Full Answer >>
  2. Are debt collectors allowed to call me at work?

    According to the Federal Trade Commission, a debt collector can contact a debtor at work unless the debtor specifically tells ... Read Full Answer >>
  3. Does cosigning a loan affect a credit score?

    Cosigning for a loan does not affect a credit score unless the other person defaults on the loan and the cosignor does not ... Read Full Answer >>
  4. Do unpaid medical bills appear on my credit report?

    An unpaid medical bill can appear on a credit report, usually after it is turned over to a collection agency. The most common ... Read Full Answer >>
  5. How is my credit score calculated?

    The credit score, commonly referred to as a FICO score, is a proprietary tool created by the Fair Isaac Corporation. This ... Read Full Answer >>
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    It is possible to tell if a security is considered to be investment grade by looking at that security's ratings with either ... Read Full Answer >>

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