Although press coverage leads many to believe that those in the debt collections
industry are chasing debts on their own behalf, the majority work on a contingency, third-party basis and are paid for collecting debts
owed to other companies.
Financial institutions are the most common entities for whom agencies seek to reclaim funds. However, in a recent article for Forbes, insideARM senior editor Patrick Lunsford points out that a variety of other business types utilize debt recovery services, including governments, auto lenders and healthcare providers. Those working in the debt buying business operate differently, and use accounting practices that more closely resemble those of consumer banks than collections agencies. They often compete for shares of banks' charged-off debt portfolios, and are governed by different legislation. Although collection agencies must abide by the rules of the Fair Debt Collection
Practices Act - as seen in the recent case of a Florida resident who sued MarkOne Financial agency for contacting her and her friends via Facebook - debt buyers do not. While some states are amending their versions of the legislation in order to apply them to debt buyers as well, the federal government has yet to dilute or eliminate the distinction.