What is a licensed collection agency?

Most states condition debt collection on a Collection agency license issued by the state's financial or commerce regulator. To earn it, the agency files an application with its formation documents, financial statements, and background checks on owners and officers, and in most licensing states posts a Surety bond whose amount the state sets. Licensed debt collectors generally operate under the agency's license rather than individual ones, since most states license the company, not each collector. A handful of states do not license collectors at all, and the federal FDCPA governs conduct everywhere on top of state licensing.

Because the requirement follows where the consumer lives, there is no single national credential. A licensed debt collection agency working nationwide holds a portfolio of state licenses, each with its own bond and renewal date, and some large cities add a municipal license on top. A Debt buyer that collects on accounts purchased from the original Credit grantor can need a separate debt buyer license in several states as well.

To verify that a collection agency is licensed, search the license database of the consumer's state regulator, often the department of financial institutions, banking, or commerce, or look the company up on NMLS Consumer Access in states that run collection licensing through NMLS. Match the exact legal name and license status, and check that the license is active rather than expired or surrendered. Creditors hiring an agency and consumers being contacted can both use the same public lookups.