What Is a Collection Agency?
A collection agency is a company contracted by your original creditor to collect an unpaid debt on their behalf, typically in exchange for a percentage of whatever they recover.
How Collection Agencies Operate
Agencies typically work on a contingency basis, they're paid a percentage of what they successfully collect, which is why persistent contact is common. They don't own the debt; they're acting as an agent for the original creditor.
For example, if an agency is hired to collect a $1,000 balance and its contract pays 30% on recovery, it only earns $300 if it actually gets you to pay, and nothing if it doesn't. That commission structure is part of why some agencies call frequently, though the law still limits how, and how often, they're allowed to contact you.
Difference From Debt Buyers
Unlike a collection agency, a debt buyer purchases the debt outright, often for a fraction of its face value, and then collects for its own benefit rather than on behalf of the original creditor.
What Happens When Your Account Goes to an Agency
You may start receiving calls and letters referencing the agency rather than your original creditor. It's important to confirm exactly who you're dealing with, see Original Creditors vs. Collectors for how to tell the difference.