A collection agency is a third party that is licensed to collect debt for the consumers and / or businesses that hire them to do so. The collection agency signs a contract with clients to represent them to actively pursue people and businesses that owe the client money. Typically, collection agencies receive a certain percentage of the debt that they collect. For example, if the two parties agree to 3% of the debt as their payment, this means that upon successful collection of a $100, the payment for the collection agency would be three dollars. The collection agency can also be authorized to pursue legal action against the debtor if a mutual agreement for repayment of the debt cannot be arranged. In some cases, certain businesses write off their outstanding debt. Some collection agencies buy these bad debts for amounts that are substantially lower than the actual debt. At this point, the collection agency now owns the debt and seeks to recover it. In these cases, the collection agency keeps whatever they collect, because now they have effectively become the creditor.
Many businesses and consumers hire collection agencies to collect balances from their accounts receivable files. Many medical professionals hire collection agencies, to help them recover their outstanding debt. Doctors, hospitals, medical clinics, chiropractors, veterinarians and dentists are some of the many fields that regularly require the help of competent collection agencies. Also, law firms notoriously have outstanding bills that they have trouble collecting.
There are also a lot of businesses that require a contract from their clients that have the need for a collection agency to recoup losses resulting from delinquent accounts. Often times, a person goes into a contract with the best of intentions, but for a variety of reasons, become unable to fulfill the terms of the contract. The typical kinds of these businesses that have contracts that have not be resolved satisfactorily are the following: Gyms, cell phone carriers, cable television and even car dealerships are just a few examples. If you frequently deal with difficulties in debt recovery, then hiring a professional collection agency is the right choice.
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