A debt collection agency, also known as a collection agency or a debt collector, is a company that specializes in recovering unpaid debts on behalf of businesses and creditors. The agency typically works on a contingency basis, meaning that they only get paid if they are successful in recovering the debt.
When a business or creditor is unable to collect on an unpaid invoice, they may decide to hire a debt collection agency to handle the situation. The agency will then contact the debtor and attempt to negotiate a repayment plan or settlement. This may involve a series of phone calls, letters, and other forms of communication in order to reach an agreement.
If the debtor refuses to pay or is unable to come to an agreement, the collection agency may escalate the situation by taking legal action. This could involve filing a lawsuit against the debtor in court, which could result in a judgment being issued against the debtor and the possibility of wage garnishment or other enforcement measures.
Debt collection agencies are regulated by federal and state laws, and must adhere to certain rules and guidelines in order to operate legally. For example, they are not allowed to engage in harassing or abusive behavior, or to use false or misleading information to collect a debt.
In some cases, a debt collection agency may offer to purchase the unpaid debt from the creditor for a reduced amount. This allows the creditor to recoup some of their losses, and allows the collection agency to collect the full amount of the debt from the debtor.
Overall, the goal of a debt collection agency is to recover unpaid debts on behalf of businesses and creditors, while also adhering to legal guidelines and treating debtors fairly.