Four Tricks To Selecting The Best Debt Collection Agency For Your Business

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There are many great debt collection agencies that can help your business save the bottom line, and get you the money you are owed. But there are also many debt collection agencies that will not fulfill your company's needs, so here are four tips to help you choose the right debt collection agency for your business.

The Agencies Reputation

As with most of the hard decisions for your company, word of mouth information can be the best way to tell whether or not a debt collection agency will be right for you. There are also many listing websites that can tell you what the highest rated agencies are and some testimonials on how the agency has helped other businesses.

Industry of Collection

Different debt collection agencies specialize in different industries. Making sure that you choose a debt collection professional that is familiar with the industry that your company is in will help you choose a debt collection agency that is right for you.

Timely Remittance

Make sure that the debt collection agency that you choose has a timely remittance policy, so you can ensure you will get your money and get it back to work for you, as swiftly as possible. Some debt collection agencies can hold your money for a long period of time, so this is also very important to check.

Cost Effectiveness

Budgeting a total cost to loss ratio when choosing a debt collection agency is an important consideration. Make sure you are not paying more than you would be collecting from potential debtors. The idea here is to improve your bottom line, and if you are paying for more than you need, you are wasting money on a useless service. Many good companies will grade the costs of their services to your needs. 

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Benefits Of Debt Collection Agency Instead Of A Internal Credit Control Department

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An internal credit control department for your business may initially seem like the best option to collect on debts, but this can be more of a hassle than you originally anticipated. Usually a single business does not have the tax supported pull, or the experience to effectively control those who are indebted to your company.

Some Things An Internal Credit Company Can Lack

While it may seem like a great idea to take the financial issues of your business into your own hands, you may actually be losing money by choosing an internal credit control department. This is because there are a lot of ways these companies have learned to deal with potential, and active debtors that you or your small business employees have not learned or are not equipped to handle. This lack of fiscal returns can seriously damage the growth of your business and cripple a budding company.

Depending on the amount of debt collection that you need, hiring a debt collection agency can actually save you money right off of the top. This is because collection agencies take money from the amount that is collected, rather than being paid based on a salary or other direct method. This medium also allows for greater reliability with a debt collection lawyer, because he does not get paid if you do not. This money you have saved can contribute to the growth of your business and increase your bottom line.

A debt collection attorney can also save relationships between you and your customers, even while collecting the owed funds. This can be a difficult task for internal credit control departments to manage. A good agency can even give your business some additional pull with a customer, especially in the instance of friendly and succinct debt collection. 

What Is The Maximum Amount Of Time You Should Give Your Commercial Debtor Before Outsourcing To Collections?

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There are many factors that affect the amount of time you should give your commercial debtor before outsourcing to collections, but the maximum amount of time is six months, and this time frame applies to large accounts or for those with whom you've had a long-term and positive relationship.  By the time the debt has remained unpaid for six months, you will have provided more than enough time for a business to come up with the means to pay off the debt.  For newer customers, or for businesses that have been slow to pay in the past, you shouldn't wait that long. 

Keeping in mind that the longer you wait, the harder it typically is to recover the debt, you might consider giving loyal customers a bit of a break before outsourcing their commercial account to collections.  This is especially true if the commercial debtor has been honest and forthright in communications or in attempting to pay the debt.  If the debtor has ignored your attempts to resolve the unpaid debt, or has promised payments and did not come through, you should consider speeding up the process of outsourcing to collections. 

If the commercial debtor has a large account and you have reasonable hope that the debt will be paid within six months, then you might want to hold off on legal collection procedures, or you will lose a portion of any amount of the debt that is recovered to fees.  However, if the lack of payment is affecting your ability to run your business because the amount of debt is so large, then you may want to speed up the process, as recovering even part of the debt as a result of collection efforts will be beneficial to you.  Your instincts, the debtor’s behavior, and the commercial debtor’s past payment history with you should influence the amount of time you wait before outsourcing to collections. 

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Familiarity with Student Loan Debt Collections is Crucial for Debt Collection Agencies

As student loan debt continues to rise, the number of agreements that debt collection agencies receive increase as well.  While this is great business for debt collection agencies, it is crucial that agencies be well aware of the rights that consumers (students in this particular case) have.

·         Debt collection agencies can only call a certain number of times per day.

·         Debt collection agencies can only call between certain hours of the day.  Contacting outside of these hours is deceptive and illegal practice on their behalf.

·         Debt collection agencies may not use any form of abusive or threatening language nor can they threaten debtors with the pursuit of legal action.

·         Debt collection agencies can, for no reason, contact a debtor’s co-workers, employers, relatives, friends or neighbors regarding the debt owed.

·         Debt collection agencies are prohibited to take part in deceptive debt collection methods, as outlined in the FDCPA, Fair Debt Collections Practices Act.

·         Debt collection agencies cannot misrepresent the amount of debt owed or the status of the debt.

·         Debt collection agencies are not allowed to provide any information regarding the owed debt to third parties.

·         Debt collection agencies are not permitted to continue contacting a debtor if that debtor has provided, in writing, a request to no longer be contacted.

·         Debt collection agencies must halt all contact with the debtor if an attorney is representing him or her.

·         Debt collection agencies must provide debtors with information regarding the debtor’s entitlement to validating the said debt.  If within 30 days the debtor has requested validation, all communications must cease until the debt has been thoroughly and appropriately validated.

Student borrowers have rights when it comes to student loan debt collection and these rights must be considered by debt collection agencies; otherwise, trouble looms as the borrower is entitled to requesting compensation for damages. 

Debt Collecting - A Regulated Business

When a company provides service, a product or a loan to an individual, they expect to receive it back as per the credit agreement.  Unfortunately, this isn’t always the case.  More often than not, especially in today’s tragic economic times, companies want vengeance on their customers that have not fulfilled the terms within the agreed upon credit agreement.

While retribution cannot be obtained, a company has a right to hire a debt collection agency.  However, debt collection agencies do not always follow the rules (unfortunately) and it gets them as well as the creditor in trouble as the debtor reports this “bad behavior” to appropriate authorities.  Nonetheless, it is possible to ensure that this doesn’t happen.

Debt collection agencies simply need to ensure that all employees are up-to-date on new regulations regarding debt collections.  One way to do this is by holding monthly meetings to address any concerns that employees may have regarding the current collections regulations.  At the same time, this meeting can be held to provide information for new regulations that have been passed.

In addition, when new collections regulations become known, it is critical that all employees receive a training session.  While this doesn’t have to be a day-long class, a brief yet full explanation of the new rules can truly help a debt collection agency succeed in obtaining owed debts.

It is crucial that every employee of a debt collection agency be completely familiar – in fact, they should know it like the back of their hand – with the Fair Debt Collections Practices Act, aka FDCPA. The FDCPA describes exactly how, where and when debtors can be contacted and outlines deceptive practices that are strictly prohibited.  When misleading practices are put into play, a debtor has rights to recover damages, which is not what the creditor wants. 

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