For collection agencies, there are many hoops to jump through before you can start a business and start collecting on your clients’ debts. If you’re involved in collecting or receiving payments on behalf of others, you must have a collection agency license. Some types of debt collection that qualify you as a collection agency include:
- Past-due accounts
- Late bills
- Property tax
- Credit card debt
If your business collects any of these types of debt collection, you likely need a collection agency license and possibly other types of business licenses. However, if any of the following are true, you may not need a license.
- You are an employee of licensed collection agency
- You’re a real estate brokers holding funds for borrowers in escrow
- You are a public officer or member of the bar
- You’re an accountant or other financial services provider for loans or accounts
The reason there are so many regulations around collection agencies is that the industry involves finances and trying to recoup funds on behalf of your clients. Your state’s business licenses, permits & tax agency wants to ensure you’re following the law, and having a collection agency license is one way to track you as a company, as well as your behavior, to make sure you’re staying legal.
Other Info You’ll Need
In addition to filling out the collection agency license and paying the associated fee, you may be required to have other types of business licenses, such as a business entity filing, trust account, surety bond, personal/corporate financial statement, or proof of residency.
If you don’t have offices in a state where you plan to collect debt, you may need to fill out a separate out-of-state collection agency license. Additionally, you’ll need to provide details about controllers (accountants) for your agency, as well as information on all owners and shareholders.
Your collection agency license will need to be renewed annually, but that process is much simpler than the initial application.