A collection agency is a business that collects debts owed to someone else, usually for a contingency fee or an agreed flat fee. Third-party collectors of consumer debts are covered by the FDCPA (15 U.S.C. §1692a, USCODE-2023, govinfo) and the CFPB's Regulation F, effective November 30, 2021 (Regulation F final rule, CFPB, issued October 30, 2020, published November 30, 2020 (85 FR 76734), effective November 30, 2021). The CFPB received about 207,800 debt-collection complaints in 2024 (FDCPA annual report 2025, CFPB, published November 21, 2025, covering 2024).

What is a collection agency?

The creditor, or the later owner, still owns the account. The agency contacts the person, takes payments within the authority it was given, and remits what it collects. Federal law does not set one fee model. Agencies are paid by a contingency fee on what is collected, or by a flat or per-account fee. This page does not state a percentage, because no dated source is cited for a typical rate.

Agency, debt buyer, and collection law firm

A debt buyer owns the accounts it bought. An agency does not, unless it is also the buyer on that account. A collection law firm is a law practice that may sue where the law allows. A third-party debt collector is the FDCPA category that covers many agencies. The labels are not interchangeable. Commercial debts are a different set of rules; see commercial debt collection.

How a collection agency works

  1. The creditor places the account, or a group of accounts, with the agency.
  2. The agency contacts the person under the rules that apply to that debt.
  3. The person pays, disputes the debt, or does neither.
  4. The agency remits payments and, if the placement ends, returns the account.

What a creditor should have ready before that placement is covered in sending a bill to collections.

What collection agencies can and cannot do

Calling hours and how often

Regulation F presumes that a call before 8 a.m. or after 9 p.m. local time is inconvenient (12 CFR 1006.6, Title 12 as of October 22, 2026). It also presumes a violation when a collector calls more than seven times in seven consecutive days about a particular debt (12 CFR 1006.14, Title 12 as of October 22, 2026). Those are presumptions in the rule, not a promise about every fact pattern. Read the section.

Validation notice

A debt collector has to provide a validation notice with the information Regulation F requires (12 CFR 1006.34, Title 12 as of October 22, 2026). The model form and the required items are in that section. See validation notice.

Third-party contacts

Contacts to find a person are limited to location information. The collector must not tell that third party that a debt is owed (15 U.S.C. §1692b, USCODE-2023, govinfo).

Time-barred debt

Regulation F limits suits, and threats of suits, on time-barred debt (12 CFR 1006.26, Title 12 as of October 22, 2026). See time-barred debt. This page does not restate state limitation periods.

Wages

A collection agency cannot take wages on its own say-so. Garnishment follows a court process. Federal law caps garnishment at 25 percent of disposable earnings, or the amount by which disposable earnings exceed 30 times the federal minimum wage, whichever is less (15 U.S.C. §1673, USCODE-2023, govinfo).

Collection accounts on a credit report

An account placed for collection or charged to profit and loss is subject to the seven-year reporting limit in the FCRA. The length of that period is set by §1681c(c) (15 U.S.C. §1681c, USCODE-2023, govinfo). This page does not restate a scoring-point impact. No dated source is cited here for one.

If a collection agency contacts you

Ask for the validation information the rule requires, and use the dispute path if the debt is not yours or the amount is wrong. The CFPB's consumer tools explain those steps in plain language (CFPB debt collection consumer tools, page last modified September 25, 2026). This page is not a complaint form and it is not legal advice.

For creditors: choosing and managing an agency

A creditor should know what the agency will say, how complaints are handled, and how payments are remitted. Oversight of that kind is an operations control, not a hope. Two related notes are third-party risk reviews and agency valuation when an owner sells.

The complaint count is a volume figure from the CFPB's 2025 annual report, which covers 2024 and was published on November 21, 2025 (FDCPA annual report 2025, CFPB, published November 21, 2025, covering 2024). It is not a finding that any one agency broke the law. It is the number of debt-collection complaints the Bureau received that year. Read the report before you quote a slice of it.

How long an agency may try to collect is not a single federal number of years. The credit-report limit above is a reporting limit, not a collection limit. Whether a collector may sue depends on the limitation period for that debt and on the time-barred rule in Regulation F (12 CFR 1006.26, Title 12 as of October 22, 2026). This page does not pick a state period.

For the creditor, the agency relationship is a contract plus a review of the reports that contract requires. The contract should say who owns the account, what the agency may settle, and how a consumer complaint gets back to the creditor. Regulation F is the rule summary. The operations hub is collections operations.

FAQ

What does a collection agency do?

It collects debts for the creditor or owner that placed them. It does not, by that placement alone, become the owner.

Can a collection agency sue you?

It can bring a lawsuit where the law allows. Regulation F limits suits and threats of suits on time-barred debt (12 CFR 1006.26, Title 12 as of October 22, 2026). This page does not restate state court rules.

Can a collection agency garnish wages?

Only through a court process. Federal law caps garnishment at 25 percent of disposable earnings, or the excess over 30 times the federal minimum wage, whichever is less (15 U.S.C. §1673, USCODE-2023, govinfo).

How often can a collection agency call?

Regulation F presumes a violation above seven calls in seven consecutive days (12 CFR 1006.14, Title 12 as of October 22, 2026). Calls before 8 a.m. or after 9 p.m. local time are presumed inconvenient (12 CFR 1006.6, Title 12 as of October 22, 2026).

How long does a collection stay on a credit report?

The FCRA seven-year limit applies, and the clock is set by §1681c(c) (15 U.S.C. §1681c, USCODE-2023, govinfo).

Sources