Editing Debt collection (section)

===Third-party agencies===
A collection agency is a third-party agency, called such because such agencies were not a party to the original contract. The creditor assigns accounts directly to such an agency on a contingency-fee basis, which usually initially costs nothing to the creditor or merchant, except for the cost of communications. This however is dependent on the individual [[service level agreement]] (SLA) that exists between the creditor and the collection agency. The agency takes a percentage of debts successfully collected; sometimes known in the industry as the "Pot Fee" or potential fee upon successful collection. This does not necessarily have to be upon collection of the full balance; very often this fee must be paid by the creditor if they cancel collection efforts before the debt is collected. The collection agency makes money only if money is collected from the debtor (often known as a "No Collection - No Fee" basis). Depending on the type of debt, the age of the account and how many attempts have already been made to collect on it, the fee could range from 10% to 50% (though more typically the fee is 25% to 40%).<ref name = "Legrady" />

Some debt purchasers who purchase sizable portfolios use a Master Servicer to assist in managing their portfolios (often ranging in thousands of files) across multiple collection agencies. Given the time-sensitive nature of these assets, an advantage of this technique is that it gives the debt purchaser more control and flexibility to maximize collections. Master Servicing fees may range from 4% to 6% of gross collections in addition to collection agency fees.{{Citation needed|date=March 2023}}

Some agencies offer a flat fee "pre-collection" or "soft collection" service. The service sends a series of increasingly urgent letters, usually ten days apart, instructing debtors to pay the amount owed directly to the creditor or risk a collection action and subsequent negative credit report. Depending on the terms of the SLA, these accounts may revert to "hard collection" status at the agency's regular rates if the debtor does not respond.{{Citation needed|date=November 2022}}

In many countries there is legislation to limit harassment and practices deemed unfair, for example limiting the hours during which the agency may telephone the debtor, prohibiting communication of the debt to a third party, prohibiting false, deceptive or misleading representations, and prohibiting threats, as distinct from notice of planned and not illegal steps.

In the [[United States]], consumer third-party agencies are subject to the federal [[Fair Debt Collection Practices Act]] of 1977 (FDCPA), which is administered by the [[Federal Trade Commission]] (FTC).

In the United Kingdom third-party collection agencies that pursue debts regulated by the [[Consumer Credit Act 1974|Consumer Credit Act]] must be approved and regulated by the [[Financial Conduct Authority]].<ref>{{cite web|url=https://api.parliament.uk/historic-hansard/commons/1973/nov/14/consumer-credit-bill|title=CONSUMER CREDIT BILL (Hansard, 14 November 1973)|date=14 November 1973|work=[[Hansard|Parliamentary Debates (Hansard)]]|access-date=6 October 2009}}</ref>