A collections agency is a business that specializes in recovering unpaid debts on behalf of creditors. When individuals or companies fail to pay their bills, the original creditor may hire a collections agency to pursue the outstanding amount. These agencies use various methods to contact debtors and encourage payment, including phone calls, letters, and sometimes legal action. Collections agencies typically charge a fee or take a percentage of the amount they collect. They operate under specific laws and regulations, such as the Fair Debt Collection Practices Act (FDCPA) in the United States, which protects consumers from abusive practices.