An incassobureau collects past-due consumer debt on behalf of its creditors in exchange for a percentage of the total amount collected. The debt collector can also purchase the debt from the creditor and become the new owner of that debt. In that situation, the debt collector is only paid a portion of the total amount collected (typically 25% to 50%).

Creditors typically send outstanding debt to debt collection agencies when they believe their efforts to collect on that debt will be unsuccessful. Some DCAs specialize in specific types of debt, while others may be large global operations that work across several countries. In either case, a debt isn’t sent to collections until the original creditor has unsuccessfully tried to collect on it for several months.

Debt Recovery Demystified: Understanding the Process with a Collection Agency

When a debt is sent to collections, it can begin to impact your credit reports, which in turn can lower your credit scores. Debts generally appear on your credit report for seven years from the date they became delinquent, although medical bills that go into collections and are subsequently paid by an insurance company can drop off your credit reports earlier.

When you talk with a debt collector, you have several rights, including the right to request that they verify in writing that the debt is valid and that you actually owe it. They can’t lie, threaten, or use profanity to try to pressure you for payment and they can’t publicly disclose your debt status without your permission. In addition, a debt collector must give you a written debt validation letter within five days of first contacting you that shows how much is owed and where it came from.