A study revealed that debt collection agencies recover over $78 billion every year. The figure clearly shows that the services administered by debt collection agencies work. You should therefore give it a try if your customers have surpassed the payment period agreed on.
However, not all debt collection agencies operate the same. You have to get a company that serves your interests and is prepared to recover your debts. So, here are nine fundamental tips you need to consider before hiring a debt collection agency:
1. Consider the Agency’s Accreditation
While searching for a debt collection agency, ensure you hire a company accredited by the necessary bodies. Licensing varies from state to state. Many states demand that debt collections agencies get licensed in the specific state in which they are collecting debts.
Avoid back street agencies since most are not accredited and don’t offer legal customer debt collection services. Check with The Association of Credit and Collections Professionals to confirm whether the agency’s registered in your state.
2. Consider the Agency’s Reputation
When hiring a debt collection agency, ensure the company has the best reputation possible. Securing funds through an agency does not mean that you are creating hostility between you and your customer.
Also, agencies with a poor reputation might handle your customers aggressively, which is likely to damage your brand image.
Therefore, an agency that handles itself with esteem is the best. This is because you still need the customers to continue purchasing your goods or services.
3. Consider if the Agency’s Insured
Some debtors may sue a debt collection agency if they’re unfair during the debt collection process under the Fair Debt Collections Practices Act. If an agency’s insured with Professional Liability insurance, this protects your business so that your company is not held responsible for hiring the debt collection agency.
It is recommended to insure your business with its own Professional Liability insurance policy.
4. Consider the Debt Collection Agency’s Practices
As stated earlier, the reputation of your business is of the most importance. Therefore, you need to hire an agency that employs professional debt collection methods rather than hostilities. Also, different states have varying laws and regulations for debt collection agencies.
You’ll want to hire one that is licensed and adheres to the rules of the Fair Debt Collection Practices Act. The act gives guidelines for debt collectors collecting debts for auto loans, medical expenses, household expenses, credit cards, and more. This will help to guarantee that overly hostile collection tactics don’t damage your company’s reputation.
5. Consider the Agency’s Collection Fees
The cost of collecting your debts is a huge factor that you should consider. It’s recommended to use the no collection, no commission principle since you cannot pay for services that have not been completed.
Also, the amount of money you are collecting is a vital factor that needs consideration. The agency’s fee needs to be significantly lower than the amount you are collecting since you cannot pay more than what you will be collecting.
6. Consider the Agency’s Industry Specialization
Debt collection agencies usually practice in specific fields. For example, some shine in securing funds from government municipalities while others excel with small businesses. Inquire about the sort of debtors the collection agency you want to hire deals with and the kind of businesses it serves.
Find an agency that specializes in your business niche, and that has collected debts in your industry.
7. Consider the Agency’s Success Rate
Debt collection is a very intricate and complicated process. Some agencies might have never been prosperous in their effort to collect debts on behalf of their clients. Hence, before hiring a debt collection agency, ensure you check the success rate of the company.
You can know this by inquiring about their turnaround period, whether days, weeks, or months. Also, you should inquire about the number of times the agency has successfully collect debts within the specified duration.
8. Consider the Types of Debts Collected
As with industry specialization, some agencies will have more experience with certain types, ages, or sizes of debts.
If your collections are in the tens of thousands rather than the hundreds, you’ll want an agency that recognizes the gravity of your debt collections process.
9. Consider the Agency’s Communication Method
Before you hire a debt collections agency, set some guidelines on how you’d like to be contacted. The agency should be willing to provide reports to debt collections clients to provide details on collections, phone calls, notes, and other methods of contact, plus all account activity.
These reports may be weekly, monthly, quarterly, or even real-time. Its recommended hiring an agency that offers a portal or dashboard that is available to the client at any time.
You Are Now Prepared To Hire A Debt Collection Agency-Don’t Wait!
Let’s face it, dealing with debtors on top of running a business can be frustrating and slow, not to mention a drain on your resources. It’s advised to choose a skilled and ethical debt collecting agency than allowing a customer to get away with not paying you. Also, it’s an analytical fact that the probability of a customer repaying your debt decreases by the day.
So don’t wait to bring a debt collection agency on board. Since different states have varying debt collection laws and regulations, we encourage you to do your research before the situation is urgent to find the debt collection partner who best suits your business needs based on the above considerations.
If you have questions or want more information, always feel free to call us at (800) 486-5500 or fill out our online contact form. And for more information to help in choosing a debt collection agency, be sure to browse our insightful blog posts.