Collection Agencies, What Are They?
A collection agency is a business that pursues payments on debts owed by individuals or businesses. Some collection agencies operate as agents of other companies, and collect debts for a fee or percentage of the total amount owed. Others work on their own account, purchasing debts from a creditor for less than the dollar amount of the debt and aggressively persuading the debtor to make their payments.
A creditor may sell debts to a collection agency in order to remove them from
accounts receivable records; the difference between the original amount
loaned and the sale price to the collection agency is written off as a loss.
Some debtors will not voluntarily pay a debt unless they are sued. Some unscrupulous collection agencies use intimidation tactics to scare debtors into paying alleged debts. They may refer the account out to an outside counsel for suit or use in-house attorneys if they have them. This is typically done as a last resort.