becoming licensed as a collection agency.
The first step for a new debt collection agency is to become fully licensed in the domestic state of the agency. The agency should then determine in what other states
they would need to be licensed. Licenses are generally required when an agency plans to collect debts from residents of that state. The application process usually
takes about three months.
Common application requirements include reference letters, samples of collection letters, and lists of all collectors/employees of the agency. Background checks are typical as
part of the licensing process and fingerprints of the applicants are sometimes necessary. Every state application is different and all regulatory agencies reserve the right to
request further information from the applicant.
Many collection agency licenses require the agency be bonded against loss while some licenses require a physical office in the state and a resident manager. Other states
require that the manager of the agency take a state examination. Application fees can be as high as $1,500 per year and most licenses must be renewed either annually or
Unlicensed collection agencies may be penalized by the state and sued by the debtors they target. State penalties for unlicensed operation of a debt collection agency include
fines up to $50,000 and imprisonment up to 10 years. If sued by debtors, unlicensed agencies may face even larger fines and longer criminal sentences.