Debt collection

A collection agency, also known as a debt collector, is a business or other entity that specializes in debt collection, i.e. pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed.

There are many types of collection agencies. First-party agencies are often subsidiaries of the original company the debt is owed to. Third-party agencies are separate companies contracted by a company to collect debts on their behalf for a fee. Debt buyers purchase the debt at a percentage of its value, then attempt to collect it. Each country has its own rules and regulations regarding them.

Debt collection has been around as long as there has been debt and goes back to the ancient civilisations, starting in Sumer in 3000 BC. In these civilisations if a debt was owed that could not be paid back, the debtor and his wife, children or servants were forced into "debt slavery", until the creditor recouped losses via their physical labour. In some societies debts would be carried over into subsequent generations and debt slavery would continue. However some early societies provided for periodic debt forgiveness such as a jubilees or would set a time limit on a debt.

The Abrahamic religions discouraged lending and prohibited creditors from collecting interest on debts owed. By the Middle Ages, laws came into being to deal specifically with debtors. If creditors were unable to collect a debt they could take the debtor to court and obtain a judgement against him. This resulted in either the bailiff of the court going to the house of debtor and collecting goods in lieu of the debt,or the debtor being remitted to debtor’s prison until his family could pay off the debt or until the creditor forgave it.

Once debtors prisons were done away with, creditors had no solid recourse against delinquent debtors. If there was collateral involved in the debt, such as with a mortgage, the creditor could take the property in order to indemnify themselves.

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