Collection agencies are independent companies that collect outstanding debt owed to a creditor. The debt is usually turned over to a collection agency after the original creditor has made several failed attempts to collect the money owed. The Fair Debt Collection Practice Act (FDCPA), enforced by the Federal Trade Commission (FTC), mandates what type of debts can be collected and the practices collection agencies can use to persuade consumers to pay outstanding debts.
Identification
Collection agencies buy debt from creditors at a reduced price and then attempt to collect the full amount owed. This practice allows the creditors to recover at least some of the money owed to them and allows the collection agencies to realize a profit when the full amount of the debt is paid. Creditors are companies that provide goods or services to you in exchange for payments.
Types
Collection agencies collect most types of personal and household consumer debt. If you haven't been paying credit card, mortgage, telephone or medical bills, your account might be sold to a collection agency. Other businesses and organizations that sell debt to collection agencies include gyms, libraries, cable companies and department stores. If you own your own business and have debts, the FDCPA does not cover those debts, according to the FTC.
Methods
Collection agencies can try to recover outstanding debt by making telephone calls and faxing or mailing letters to you regarding the amount you owe. The FDCPA forbids bill collectors from calling you before 8 a.m. and after 9 p.m., unless you agree to be contacted during these times, according to the FTC. Collectors can contact you at work unless you provide oral or written notification that you do not wish to be contacted at your job. Debt collectors can call relatives or neighbors to try to determine your address, place of business or telephone number, but cannot contact third parties more than once.
Procedures
Collection agencies are required to send you written notice of your debt with five days after a debt collector contacts you. The notice must include the amount due, the name of the original creditor and instructions regarding what to do if you have already paid the debt or do not believe that the debt is yours. The debt collector can not contact you if you send a letter within 30 days asking for verification of the debt or explain that you do not owe the amount in dispute. If the collection agency receives verification that you do owe the money, it can contact you again. If you believe that a collection agency is acting in violation of these provisions, you can lodge a complaint with the attorney general's office in your state or the FTC.
Warning
If you do not pay the collection agency the money that you owe, a lawsuit can be filed against you. Should you lose the lawsuit, the money that you owe will be garnished from your paycheck. When your pay is garnished, a certain percentage of the amount you owe will be removed from your check each week until the debt is paid. Federal benefits, including Social Security, veterans' and supplemental security income benefits are usually exempt from garnishment, although even these benefits might be garnished if you fail to pay taxes, child support or student loans.
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