Collection Agency Licensing
Many states license debt collection agencies to protect the public from abusive practices and to create minimum standards of operation. The licensing process is often rigorous and time consuming. Let the experts at Licenselogix be your guide through the complex process of acquiring your collection agency license.
The first step for a new debt collection agency is to become fully licensed in the domestic state of the agency. Then the agency should assess in what other states it will need to be licensed. Licenses are generally required when an agency plans to collect debts from residents of that state. The application process generally 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 a typical part of the licensing process. Fingerprints of the applicants are sometimes necessary. Every 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. 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. Most collection agency licenses must be renewed either annually or biennially.
Ramifications of Non-Compliance
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 may include fines up to $50,000 and imprisonment for up to 10 years. If sued by debtors, unlicensed agencies may face even larger fines, longer criminal sentences, and/or a company shut down.
How we help your business:
- Guiding you through the complicated process of becoming licensed.
- Accurately preparing the application and attachments.
- Following through to ensure the license is awarded.
More Resources:FTC Information on Debt Collection Agencies
FDIC Law and Regulations
Association of Credit and Collection Professionals
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