Resources
Debt collection glossary
Plain-English definitions of the debt collection and accounts receivable terms you'll encounter when recovering past-due balances — from first-party collections and contingency fees to FDCPA, Reg F, and TCPA.
- Accounts Receivable (AR)
- The outstanding balances customers owe a business for goods or services already delivered. Managing AR well means turning those balances into cash before they age into bad debt.
- Aging (Accounts Receivable Aging)
- A report that groups unpaid invoices by how long they have been outstanding — typically 0–30, 31–60, 61–90, and 90+ days. The older the bucket, the harder the balance is to collect.
- Bad Debt
- Receivables a business no longer expects to collect and removes from its books. Bad debt is earned revenue that turns into a direct loss to margin.
- Charge-Off
- The accounting action of writing off a receivable as uncollectible, usually after a set period of non-payment. A charge-off does not erase the debt, but it recognizes the loss against earnings.
- Collection Agency
- A third-party company that pursues overdue debts on behalf of a creditor, typically for a contingency fee of 25% to 50% of what it recovers. Agency contact comes under the agency's name rather than the original business.
- Contingency Fee
- A pricing model where the collector is paid only a percentage of the funds actually recovered. If nothing is collected, no fee is owed — often described as 'no collection, no fee.'
- Days Sales Outstanding (DSO)
- The average number of days it takes a business to collect payment after a sale. A lower DSO means faster cash flow and healthier working capital.
- Delinquency
- The state of an account being past its due date. Delinquency stages (for example, 30, 60, or 90 days late) usually determine how outreach escalates.
- FDCPA (Fair Debt Collection Practices Act)
- The primary U.S. federal law governing how third-party debt collectors may communicate with consumers. It restricts abusive practices, sets disclosure requirements, and defines consumer rights.
- First-Party Collections
- Recovering overdue balances under your own brand name and voice, as an extension of your team, rather than handing accounts to a third-party agency. It preserves the customer relationship and typically recovers more of each balance.
- IVR (Interactive Voice Response)
- An automated phone system that lets customers hear balance information and make payments through voice or keypad input, with the option to transfer to a live agent.
- Payment Plan
- A structured arrangement that lets a customer pay a balance in scheduled installments rather than all at once, increasing the likelihood of full recovery.
- Recovery Rate
- The percentage of a past-due balance (or portfolio) that is successfully collected. Higher recovery rates come from earlier, consistent, and customer-friendly outreach.
- Regulation F (Reg F)
- A CFPB rule that modernizes the FDCPA for modern channels, setting expectations for contact frequency, disclosures, and the use of email and text in debt collection.
- TCPA (Telephone Consumer Protection Act)
- A U.S. federal law that governs calls and text messages to consumers, including consent requirements and opt-out handling. It is central to compliant SMS and voice collections.
- Third-Party Collections
- Collections handled by an outside agency that contacts customers under its own name, usually later in the delinquency cycle. It often costs more and risks the customer relationship.
- UDAAP (Unfair, Deceptive, or Abusive Acts or Practices)
- A standard enforced by the CFPB that prohibits unfair, deceptive, or abusive conduct in consumer financial services, including collections — applying to first-party creditors as well.
- Working Capital
- The cash a business has available for day-to-day operations, calculated as current assets minus current liabilities. Faster collections directly improve working capital.
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