State by State Collection Agency Requirements

State Licensing Requirements for Collection Agencies

A collection agency is a business that pursues individuals or businesses for payments on debts owed. For example, let’s say you stopped paying on your credit card and it has been over 120 days or so since your last payment. Chances are, that credit card company has hired a collection agency to go after you to collect the debt. Now you are going to be hounded by a collection agency for the money you owe.

There are three types of collections agencies:

1. First-Party Agencies. These are oftentimes subsidiaries of the original creditor.
2. Third-Party Agencies. These are companies that are contracted by the original creditor to collect debts on their behalf for a fee.
3. Debt Buyers. These companies purchase debts at a percentage of the value and then attempt to collect them from the debtor.

Each state has its own licensing requirements for collection agencies. Some states require a collection agency to have a license and some do not – some require a bond in order to do business and some do not. It is important you know what state licensing requirements are needed in your state for collection agencies. Because, if you are being harassed by a collection agency that is not licensed in your state, you can file a complaint with the FTC and have them investigated.

Below is a chart that is broken down by state to show which states require a license to operate. It is always a good idea to check your state’s government site just to make sure but this a quick reference.