If you’re behind in paying your bills, or a creditor’s records mistakenly make it appear that you are, a debt collector may be contacting you.
Under the Fair Debt Collection Practices Act (FDCPA), a debt collector is someone who regularly collects debt owed to others.
This includes collection servicers, attorneys that collect debt, and debt collectors that buy delinquent debts and then try to collect on them.
Some collection agencies are internal departments or subsidiaries of the company that owns the original debt. Typically these types of collection agencies try to collect debts for several months before passing them on to a third-party agency or selling the debt in its entirety.
The term collection agency is usually applied to third-party agencies, called such because they were not a party to the original contract.
The creditor may also assign accounts to collection servicer on a contingency-fee basis.
The collection agency servicing the account makes money only if payment is collected from the debtor.
Depending on the type of debt, the age of the account and how many attempts have already been made to collect on it, the fee could range from 10% to 50%.