Debt collection is basically the act of chasing payments of outstanding debts by people or companies. A collection company is also called a debt collector or collection agency. They collect debts for a third party and also act as the go between for the debtors and creditors. In other words, a collection company takes on the role of getting the money you owe and then trying to get you to pay them through a series of negotiation and collection activities.
Collection agencies buy delinquent accounts from banks and other financial institutions at discount prices. Once they have the delinquent accounts, they pass on the information to debt collectors. These debt collectors try to contact you, your creditors or anyone who has recently defaulted on their account and collect on the delinquent amounts. This is where debt collection agencies differ from other collection agencies – they have more sophisticated tactics to pursue you for the delinquent amounts. Many of these tactics can be illegal, such as harassing you with phone calls or sending legal notices.
Debt collections agencies use several different techniques to improve their chances of getting you to pay up. One technique is to threaten you with legal actions if you don’t pay up. Another technique is to target low-income and minority groups, which are less likely to have accounts in good standing and may not have access to credit cards, so they would be easier to collect from. Some agencies go so far as to make up fake debts in order to get the highest possible payment. Overall, debt collection agencies have very low success rates, but they can boost their success rates dramatically by improving their targeting techniques.