Collection Agency

AAA

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.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Lender

    Someone who makes funds available to another with the expectation ...
  3. Writ Of Seizure And Sale

    An order issued by a court that allows the petitioner (usually ...
  4. Creditor

    An entity (person or institution) that extends credit by giving ...
  5. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  6. Debtor

    A company or individual who owes money. If the debt is in the ...
Related Articles
  1. Negotiating A Debt Settlement
    Budgeting

    Negotiating A Debt Settlement

  2. Outfox The Debt Collector's Hounds
    Personal Finance

    Outfox The Debt Collector's Hounds

  3. A Guide To Debt Settlement
    Credit & Loans

    A Guide To Debt Settlement

  4. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center