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Collection Agency
What Is a Collection Agency?
A collection agency is a company hired by creditors to recover unpaid debts.
When an account becomes seriously delinquent, the original creditor may assign or sell the debt to a collection agency.
Collection agencies attempt to contact borrowers and arrange repayment.
How Collection Agencies Work
Agencies may:
- Contact you by phone or mail
- Offer payment plans
- Negotiate settlements
They must follow consumer protection laws regulated by the Federal Trade Commission, which limit harassment and abusive practices.
Why Collection Agencies Matter
Accounts sent to collections can:
- Lower your credit score
- Remain on your report for up to seven years
- Increase financial stress
However, consumers have the right to request debt validation and dispute inaccurate information.
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