What are Collection Agencies?

If you miss more than a few payments, often creditors will ask for the full balance of the loan or debt to be paid immediately. The creditor has the right to do this if your loan agreement contains an "acceleration clause." If you immediately bring the payments up to date, the creditor may then decide not to insist that you pay the rest at once.

But when you do not respond with a payment, the creditor may threaten to turn the matter over to a collection agency, a business that collects debts for others. Often collection agencies work on commission, collecting between 30% to 60% of the amount they collect from you. You can expect debt collectors to use high-pressure tactics to collect a debt, although the Fair Debt Collection Practices Act (FDCPA) protects consumers from unnecessary harassment and offensive strong-arm tactics. The act-which applies only to debt collectors, not creditors-makes very clear what a collection agency, may not try its efforts to get you to pay.