Collection Agency

A collection agency bond works like many other surety bonds, it ensures an agency fulfills its contract in an ethical manner. This bond ensures the agency will properly handle money it receives while pursuing outstanding debts. It also guarantees those funds are routed to the company with the outstanding debt.

If the collection agency misappropriates these funds, the obligee can file a claim on the agency\'s bond. If the claim is determined to be valid, the face value of the bond is released by the surety company and paid by the collection agency.

Collection agency bonds are required by the state in which the agency is operating. These bonds are usually around $5,000. The state also collects a small processing fee to process the bond and put the it on record. The bond company would need to verify that the agency has the funds and the financial means to be able to pay the bond in full if a claim should be filed.

The collection agency bond does increase the likelihood that the agency will follow state and local regulations regarding debt collections.