Collection agency

Full definition

A collection agency enters the picture when a borrower has defaulted on a debt and the original creditor either hires the agency on commission to collect it (third-party collection) or sells the debt to the agency outright (debt buyer). At the point of sale, the debt buyer acquires the right to collect the full outstanding balance for a fraction of the face value (often 5-20 cents on the dollar for very old debt). The Fair Debt Collection Practices Act (FDCPA, 15 U.S.C. §1692) governs the conduct of third-party collectors. Key provisions: - Collectors may only contact you between 8 a.m. and 9 p.m. in your local time zone. - Collectors may not contact you at work if they know your employer prohibits such calls. - You can demand in writing that the collector stop contacting you (cease-and-desist letter). They must then stop, except to notify you of legal action. - Within 5 days of first contact, the collector must send a written notice stating the amount owed, the name of the original creditor, and your right to dispute the debt. - You have 30 days to dispute the debt in writing; during this time the collector must stop collection activity until they verify the debt. Original creditors collecting their own debt are not subject to the FDCPA (they are covered by state law), but many states have parallel statutes. The CFPB supervises large collection agencies. Key consumer right: if you believe a collector is violating the FDCPA, you can sue in federal or state court for up to $1,000 in statutory damages plus actual damages and attorney fees.

• Fair Debt Collection Practices Act (FDCPA)
• Debt validation letter
• Assignment of debt