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.

INVESTOPEDIA EXPLAINS'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
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    The most impactful consumer protection laws and regulations in the United States are overseen by the Federal Trade Commission, ... Read Full Answer >>
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    According to the Federal Trade Commission, a debt collector can contact a debtor at work unless the debtor specifically tells ... Read Full Answer >>
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    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 >>
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    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 >>
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