Jun 26 2011

What does a collection agency do?

Category: Business & Economy


CollectionsWhen an individual has an outstanding debt, the owner of the debt (also known as the creditor) will typically hire a 3rd party collection agency to collect and settle what is owed to them. The goal of a collection agency is to recover money (owed to the creditor) that is not paid back in a timely manner in exchange for a percentage (or commission) of what is collected. The collection agency can also purchase the debt outright for pennies on the dollar in an attempt to profit from the uncollected debt. Individual collectors are typically paid a low base salary with performance incentives based upon the amounts they are able to collect. Sometimes creditors will sell debt in bulk to collection agencies. These agencies are known as Junk Debt Buyers (JDBs) and since they purchase debts for pennies, their profits can be enormous if they are able to get a percentage of the debtors to pay.

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