Collection Agency

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.

RELATED TERMS
  1. Debt Buyer

    A company that purchases debt from creditors at a discount. Debt ...
  2. Adjustment Bureau

    An organization that focuses on helping businesses collect outstanding ...
  3. Collection-Proof

    A debtor who doesn’t have any assets that a creditor can collect ...
  4. Fair Debt Collection Practices ...

    A Federal law that limits the behavior and actions of debt collectors ...
  5. Bad Debt

    A debt that is not collectible and therefore worthless to the ...
  6. Average Collected Balance

    The average balance of collected funds (less any uncleared or ...
Related Articles
  1. Personal Finance

    The Risks of Investing in Art and Collectibles

    Investing in art and collectibles has the potential to lead to a big payday, but it's often a difficult road.
  2. Personal Finance

    The Advantages of Investing in Art & Collectibles

    Investing in collectibles can be profitable and fun, and can offer tax benefits for some.
  3. Financial Advisor

    How Are Collectibles Taxed?

    If you plan to sell collectibles, it's imperative that you know the tax implications.
  4. Retirement

    Contemplating Collectible Investments

    Profit margins are slim, but that needn't deter those with a passion for eras past.
  5. Personal Finance

    6 Reasons to Use a Household Help Agency

    It's not just because they find you well-qualified workers. Agencies spare you the paperwork and taxes required when you hire on your own.
  6. Investing

    What's an Average Collection Period?

    Average collection period is an accounting term referring to the average number of days between a sale made on credit, and receipt of the payment. Businesses monitor this number to make sure ...
  7. Personal Finance

    6 Ways To Keep Aggressive Debt Collectors At Bay

    Get an upper hand on debt collectors by knowing your rights and using these tips.
  8. Personal Finance

    Inside Secrets of the Debt Collection Business

    Understanding how the debt collection business works will give you a better chance of coming out ahead if you ever have to tangle with a collection agent.
  9. Personal Finance

    Dawn Of The Zombie Debt

    Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive.
  10. Investing

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
RELATED FAQS
  1. How do debt collection agencies make money?

    Find out how a collection agency makes money, what rules it is bound by, and when it can take a pay check or garnish a bank ... Read Answer >>
  2. If a collection agency buys my debt from another agency, does the debt become 'new'?

    Find out what happens when your debt account is sold from one collection agency to another and the impact on your balance ... Read Answer >>
  3. How can a creditor improve its Average Collection Period?

    Read about some of the ways that a business can improve its accounts receivable management practices to shorten its average ... Read Answer >>
  4. Why is Average Collection Period important to a company?

    Discover why the average collection period can be a particularly important accounting ratio for a company that relies heavily ... Read Answer >>
  5. What would be the cheapest way to deal with a debt collector?

    I owe $2,500 to a debt collector. My main question is should I try to tackle the collection agency myself or hire a credit ... Read Answer >>
  6. In which industries is Average Collection Period most important?

    Find out which industries are most concerned with average collection period, and how different types of companies interact ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center