Using Asset and Bank Account Locators Effectively

The new “hot topic” in the collections industry right now is dormant collections, and debt collectors and collection agencies across the nation have begun to focus on dormant collections accounts as a valid revenue source.  However, this “hot topic” is also a topic that is fraught with concerns over regulation and litigation, and collectors should approach it cautiously, being sure to remain in compliance with Federal regulations at all times.  With careful research and properly managed dormant collection accounts, these potential revenue sources can help a collection firm offset the costs of litigation and resources needed for asset searches.

 

When beginning a dormant collection, a collection agency or collection law firm should first validate the judgment.  Often, this is easier said than done.  In many cases, the balances shown on the court documents are incorrect, the information doesn’t line up, or there are other issues that might cause compliance issues if not thoroughly validated.

 

After complete and thorough validation of the debt and the debtor’s responsibility to pay it, the firm should then find a solid source for asset location.  It’s important to remember in this step that accuracy rates for even the best asset locator sources are rarely more than 20% and often closer to 5%.  This inaccurate information can end up costing the creditor or collection holder even more valuable time and money.

 

Collections firms who specialize in dormant judgment validation and collection will often have the resources to perform skip tracing and asset location without hiring a third-party firm.  However, these searches take considerable time and money, two resources that many collections firms have little of.  Once a dormant judgment is established, validated and located, the collection firm can then use tactics such as wage garnishments to ensure that the collection will be processed and time and money are well spent.  

How Dormant Judgment Collections Will be the Next Big Arena for Collection Attorneys and Agencies

The economic struggles still facing our nation—as well as the rest of the world—have a significant impact on the collections and accounts receivables business.  As consumers are unable to find jobs to replace the ones they might have lost, and the housing market is still keeping many homeowners underwater with mortgages they can’t afford, the collections industry faces a truly formidable foe.  Not only are debtors moving more and becoming increasingly hard to locate, but the amount of money that goes into resources to locate a debtor and his/her assets is often not worth the amount of the debt they owe.

 

In order to recoup the additional operating expenses involved in tracking down and filing lawsuits against debtors, collection firms and collection agencies are looking to dormant judgments—and there are plenty of them out there.  A collections enforcement firm recently released statistics revealing that up to 80% of judgments remain unpaid every year.  These high numbers of unpaid debt, even after the debtor had been sued, has caused a serious dent in the pockets of collection attorneys and collection agencies around the country, and has prompted such tactics as skip tracing and accessing payroll databases in order to locate debtors who have changed their address, phone number, and/or place of employment.

 

When reopening a dormant collection, it is important for the agency to spend time thinking about the best chances for recovery so that no more wasted effort or money is spent toward the dormant account.  One way to do this is through the use of asset locators to determine the debtor’s vehicle and real estate assets.  If the debtor has significant assets—either in the form of real estate, vehicles, bank accounts, retirement accounts, etc.—the collection agency can then place a lien against these properties or receive court approval for wage garnishment, making collecting from a non-compliant debtor a little easier in the process.