Tips For Hiring a Collection Agency | What Your Business Should Know
Are you looking to hire a collection agency? Which one do you choose? Here’s every business owners guide to finding a great debt collection agency at a fair price.
What’s the craziest thing you’ve heard a bailiff do to get their client’s money? If you’ve ever seen the likes of South Beach Tow or Operation Repo you’ll know collection agents have a reputation for indulging in pretty outrageous behavior. With U.S household debt rising to $13.3 Trillion in the second quarter of 2018 and the average American owing $38,000, debt collection is a big business; it’s no wonder the industry attracts the occasional cowboy.
But it’s important to remember that these shows are staged.
In fact, the industry is heavily regulated. Yet finding the right collection agency for you can be a stressful experience.
You’re probably exhausted after months of chasing debt on your own and frustrated that you now have to fork out for a debt collector to do it on your behalf. But a little research can ensure hiring a debt collector is a worthy investment.
Debt Collectors are Like Doctors…
Sure, all doctors know about medicine but would you really trust a urologist to perform an operation on the brain? Similarly, an agent who specializes in property repossession might not be the best person to consider if you are chasing an employer who owes you money as the result of an employment lawsuit for wrongful dismissal.
This might also impact the equipment that is needed for the job: if you need a car repo’d you need an agent who has a tow truck whereas if you want property recovered then you need a collection company that has a good locksmith, a set of crowbars and a van to remove the tenants’ goods at their disposal.
Some debtors really don’t care. They are happy to sit around in broad daylight, easily traceable, but unwilling to pay until the law and your debt collection agent makes them.
Others are more crafty.
In their mind a collection company can only collect if they know where to look. But collection agents aren’t stupid. Playing detective is what they do for a living and there is even a name for it. Skip tracing.
And to do this effectively, the debt collector has to be licensed to trade in all 50 states. Otherwise, a debtor in California could simply cross the border to Nevada and very little could be done.
There is no license covering all of the U.S and sometimes the license fee for one state alone can be as much as $600,000. If you know the debtor you’re pursuing has a habit of slipping through the net, be sure to consider a larger chain with a presence across the country rather than a smaller outfit.
Rates for debt collection vary highly. They can be as low as 6% of your collections but also much higher, at around 15% commission.
The ones that charge a lower rate might not put the resources into tracking down the debtor, like the higher fee-charging agents.
Then again, one letter from a real debt collection agency might be all it takes to have your debtor quaking in their boots and happy to pay up.
You might also fork out a ton for a good debt collection agency but realize that, on balance, you’re owed such a relatively small amount of money, most of it is going to go on paying the agency fees anyway, even if they are successful.
How to Spot a Cowboy
So what kind of regulations should you look out for to ensure you get a fairy God collector and not a cowboy?
- Google is your friend. With a bit of intuition it’s pretty easy to find out who is running a scam these days. Any reputable agent will have their own website. Digital marketing is comparatively cheap and being listed on Google, which has a reviews section, is a must. It’s of course natural to find the odd bad review – they are a debt collection company after all – but if many people are making the same negative points, there’s probably some truth in there.
- The Fair Debt Collection Practices Act (FDCPA), overseen by the Federal Trade Commission (FTC), governs the acceptable behavior of debt collectors. To trade legally an agent has to sign up. The guidelines ensure that debtors aren’t contacted after 9pm and before 8 am and try to protect them from abusive language, general intimidation and outright lies about what could happen if they don’t pay on time.
Whilst it may be tempting to go with an agency with a reputation for a harder line approach in the hope of a higher chance of getting your money back, avoid these at all costs.
The debt collector has potentially broken the law and you may be caught up in it. Equally, if their license is revoked as a result then the debt collector can no longer act for you and you are back to square one.
Find the Perfect Debt Collection Agency
Imagine how useful it would be if there was a computer program that could help you find exactly the right debt collection agency and avoid those pesky cowboys. Well, we have a tool that makes it as easy as one-two-three (well maybe a few more steps as well). Just answer these straight forward questions:
- If you’re collecting from an individual, a business or both?
- How much you’re collecting?
- How many accounts you are collecting on?
- What’s the status of the court judgements on those accounts?
- How long the payments have been outstanding?
- What’s your zip code?
- What’s your e-mail address? (so we can send you the results)
- Tell us some basic information about you and your business
Does this sound easy to you? Then don’t hesitate and fill out our form today and see which debt collection agencies work for you.