Why do you believe you need to have a contract with the collection agency? Think of the debt as an asset that the bank owns. It sells that asset to someone else. The new buyer now owns it. You have no say in the matter as it doesn't really involve you. The selling of debt is a well established practice not only of bad debt but also most good debt is bundled and sold as well.

I would like some clarification. If a collection agency purchases a debt from lets say a bank. How can they possibly collect if the debtor did not agree to this? The collection agency would not have a legal contract with the debtor, so what would be the obligation to pay.

The original party (the bank) received compensation from the sale of the debt and the write off of the loss, so they would no longer have a claim, how can the collection agency legally collect this debt if the debtor refuses to recognize them??

Can anybody clear this up for me?