Why We Need Collection Agency Bonds
A collection agency’s job is to collect debts. As a result, they often deal with sensitive information, such as personal and financial data of the general public. This can open the possibility of serious theft and a misdemeanor if a collection agency uses sensitive information maliciously. Therefore, collection agencies are high-risk companies. Collection agency bonds are an important instrument to protect against any fraudulent behavior done by the agency.
Like all surety bonds, there are three parties in a Collection Agency Bond:
- The collection agency (the principal)
- The government (the obligee)
- The surety, or financial institution issuing the bond
Purpose of the Bond
Since collection agencies deal with such sensitive information, the possibilities of fraud are extremely high. The collection agency bond ensures that the agency will conduct itself in an ethical and professional manner. It is critical to ensure the dependability and credibility of such agencies.
Anyone can make a claim when an agency acts in an unethical manner, such as theft, discrimination, fraud or overcharging the customers. The claim typically does not exceed the amount of the bond.