how a collection agency works
creditors will often hire a collection agency after a borrower is 60 90 days or more past due with a debt the delinquency typically will be reported to the three major credit bureaus equifax experian and transunion reputable collection agencies abide by the fair debt collection practices act fdcpa when it comes to contacting you and trying to collect the debt while creditors sometimes hire collection agencies to collect debt on their behalf they also sometimes sell debt often for substantially less than the amount of the debt in these cases the collection agency becomes the new creditor if the borrower pays the debt as a result of the collection agency s efforts then the creditor pays the collection agency a percentage of the funds or assets that it recovers depending on the terms of the agreement if the borrower will not or cannot cover their arrearage the collection agency can update the borrower s credit report with a collection status which leads to a drop in the individual s credit score a low credit score can affect a person s chances of obtaining a loan in the future as an account in collections can remain on their credit report for seven years collection agencies deploy multiple strategies to try to retrieve funds such as the following debt collection agency regulationsthird party collection agencies but not creditors in house collection departments are bound by the fair debt collection practices act fdcpa of which some rules are cited below a debt collector may not do the following a debt collector may however do the following 