How to Create a Collection Agency
A collection agency is a business entity that collects debts owed by customers on behalf of another business. Some collection agencies even buy the debt for a small percentage of the amount owed and attempt to collect the full amount from the debtor. Collection agencies must be licensed and operate within the confines of both federal and state collection practices. Staring a collection agency is a suitable business for someone who has a background in finance and/or sales.
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Instructions
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Study the FDCPA and state collection practices laws. The FDCPA is the Federal Debt Collection Practices Act and it prohibits collection agents from engaging in certain activities such as presenting themselves as law enforcement or threatening to place the debtor on a debtor's list (see Resources).
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Apply for a collection's agent license. Contact your state's financial licensing or professional licensing department. Ask what license requirements you must meet to obtain a collection agency license. Requirements vary by state but in general, most states require a surety bond, insurance and a background check.
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Establish your fee structure. For instance, you might collect debts under $500 for a 20 percent fee and debts between $500 and $1,000 for 15 percent. Create a fee agreement for clients to review and sign when contracting your collection agency.
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Open an office and get a toll-free number. Lease an office in a professional office park that can accommodate a few small offices or be divided into cubicles. Sign up for a toll-free number with the local telephone communications company.
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Draft collection letter templates. Write a series of different collection letter templates dealing with various debts such as auto loans, student loans, credit card debts and medical debts (See Resources).
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Network among local businesses. Send welcome and introduction letters to local businesses that would be in need of a collection agency's services such as medical offices and contractors. Provide any that respond with your fee schedule.
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References
Resources
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