When a creditor has a difficult time collecting a debt they may turn to a collection agency to help them out. A collection agency is a business that works at pursuing payments on delinquent debts from an individual or a business. Most collection agencies are working as an agent of the creditor and they receive a fee or a percentage of the amount collected.

Some collection agencies, however, are “debt buyers” and in that case they have purchased the debt from the creditors for a fraction of the value and in return they will try to collect the full balance.

Creditors typically refer or sell their bad debts to a collection agency so that they can remove them from their accounts receivable records. They can then write off anything that is not collected as a loss on their books.

In the past, debt collection agencies have often engaged in threatening behavior, harassment and coercion. However, there are laws that protect consumers from abusive behavior. In the United States, the Federal Trade Commission (FTC) enforces that Fair Debt Collection Practices Act or the FDCPA, which prohibits debt collectors from using unfair, abusive or deceptive practices in order to collect a debt from you. Most of the states have additional laws to protect consumers from abuse from a debt collector.

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