A collection agency helps individuals and businesses collect money from past due accounts. Because a collection agency requires little overhead and minimal direct contact with the public, many people have found it lucrative to start their own collection agency business from home. The following tips provide guidance for starting a collection agency business.
Instructions
1. Research all applicable state and federal laws. The laws protecting a debtor's rights regulate such issues as the time of day you can make collection calls, required notices, representations you can or cannot make and confidentiality. You must be aware of all of these laws before starting a collection agency business.
2. Set up an office. At a minimum, you will need a computer and a telephone. It is also helpful to have a comfortable desk and chair, file drawers, business cards and advertising material to distribute to local businesses.
3. Establish a collection plan. This is the process that your collection agency business will use to collect the debt. This may consist of an initial letter stating the debt and asking for payment and follow-up telephone calls, followed by a certified letter stating that payments must be made by a certain date or a lawsuit will commence. Be aware that the Fair Credit Debt Collection Practices Act may impact the content of these communications.
4. Solicit business. Contact and distribute your advertising material to local companies or individuals that provide credit. Lawyers' offices, medical centers, furniture companies and travel agencies are all good prospects.
5. Get started. Now that you have your first client, you will need a contract authorizing your collection agency business to collect the debt and establishing a procedure for taking whatever legal action may be necessary to enforce the debt. The contract should serve as proof that the debt is valid. You will also need to set a fee; usually a percentage of the amount collected.
