The Ultimate Guide to Choosing Collection Agencies
In the US alone, over 30 million people have at least one debt in collections. If your business is experiencing difficulty collecting payments from customers, hiring a collection agency is a great idea. Collection agencies can be an excellent resource for businesses of all sizes, and they can help recover money that would have otherwise been lost.
However, not all collection agencies are created equal. Did you know that one of the biggest complaints people have against debt collectors is receiving threats? Some of these threats involve damaging credit reports, arrests, collection of exempt funds, or even deportation.
While you need to get your money back, you may want to be wary of debt collection agencies that go too far. To get the best results for your business, choosing the right collection agency is important. This guide will teach you everything you need to know about choosing a collection agency.
Consider Whether the Collection Agency Meets Your Needs
The first step in choosing a collection agency is to consider your needs. What type of debt do you need to collect? How much money do you hope to recover?
Some agencies specialize in certain types of debt, such as medical debt or credit card debt. Others may have a higher success rate when it comes to recovering money or you may need a commercial collection agency. It's important to do your research and find an agency that specializes in the type of debt you are trying to collect.
Check the Agency's Licensing and Accreditation
Before selecting a collection agency, it's important to check their licensing and accreditation. All legitimate collection agencies are licensed by the state in which they operate, so you can easily check this online. The Better Business Bureau also accredits many collection agencies.
The BBB rates businesses on a scale from A+ to F, and you can check the accreditation of a collection agency on the BBB website. Make sure the agency is accredited by one of the major debt collections accrediting organizations, such as the ACA International or the Commercial Collection Agency Association.
This will ensure that the agency is reputable and follows best practices. When checking licensing and accreditation, ask about the collection agency's compliance history. It'll help you determine whether or not the agency has had any legal issues in the past.
Consider the Collection Agency's Experience
When choosing a collection agency, you should also consider the agency's experience. How long has the agency been in business? What's their track record for collecting debt?
Ask the potential agencies about their experience and find out how many debts they have successfully collected. You should also ask about the type of debt the agency specializes in collecting.
An experienced collection agency will have a better understanding of the legal process and how to collect a debt. They'll also be more likely to use aggressive tactics, such as litigation, to recover money for you.
That said, it's important to remember that these tactics can also damage your relationship with the debtor. Make sure you are comfortable with the agency's tactics before selecting them.
Consider the Size of the Collection Agency
The size of the collection agency is an important consideration when choosing a collection agency. Some agencies are small, while others are large national companies. Consider what type of service you would prefer, and make sure to ask the potential agencies about their size.
Smaller agencies may be more personal and have a higher success rate because they specialize in a certain type of debt. However, they may not have the resources to handle large debts. Larger agencies are more likely to have experience dealing with a wide range of debt, but they may be less personal and less successful when it comes to collecting smaller debts.
When considering the size of the debt collection agency, you should also ask about their geographical reach. Some agencies only operate in certain areas, while others have a national or international presence.
Check Their Online Customer Reviews
It's important to do your research before selecting a collection agency. One of the best ways to get an idea of how an agency performs is by reading online reviews. Yelp, Google+, and Facebook are all great places to start.
Look for reviews from businesses that have used the collection agency's services in the past. This will give you a good idea of what to expect from the agency. Keep in mind that not all reviews are accurate, and some may be biased.
However, if there are a lot of negative reviews, it's probably best to avoid that agency. On the other hand, if there are a lot of positive reviews, the agency is likely doing a good job.
It's also important to note that some agencies will remove negative reviews from the internet. If you can't find any reviews, the agency likely has something to hide.
Ask the Agency for References
Once you have narrowed down your choices to a few collection agencies, it is important to ask for references. Ask the agencies for a list of businesses that they have successfully collected money from in the past. Contact these businesses and ask them about their experience with the collection agency.
Were they happy with the results? Did the collection agency damage its relationship with the debtor? You should also ask the collection agency for a list of businesses they have been unsuccessful in collecting from.
They'll give you an idea of the agency's success rate. Keep in mind, however, that not all debts can be collected. Sometimes debtors simply cannot or will not pay what they owe. It's important to get as much information as possible before choosing an agency, and references are a great way to get this information.
Consider the Agency Fees for Debt Collection
When considering a debt collection agency, it's important to understand the fees that'll be associated with using their services. Collection agencies typically charge two types of fees: commission and administrative fees. The commission fee is a percentage of the total debt that the agency collects.
Be sure to get all of the information in writing, so there are no surprises down the road. Furthermore, some collection agencies may attempt to charge you for “expenses.” These expenses can include items such as postage, long-distance phone calls, and even legal fees.
Be sure to ask the agency what these expenses are and how much they'll charge before signing any agreement. It's important to remember that the fees charged by a collection agency are in addition to the money you are trying to collect.
Even if the collection agency does not succeed in collecting any money from your debtors, you'll still be responsible for paying the commission and administrative fees.
Inquire About Their Legal Team
When choosing a collection agency, it's important to inquire about their legal team. A good legal team can be essential in helping your business recover debt. In addition, a good legal team will be well-versed in the Fair Debt Collection Practices Act (FDCPA) and other state and federal laws that regulate debt collection.
Ask the collection agency about the experience of their legal team. Ask how many lawsuits they have won and what type of results they have achieved in the past. You should also consider the size of the legal team.
A small legal team may not be able to handle a large number of cases at once. This could lead to delays in getting your money back. Conversely, a large legal team may be too expensive for your business. It's important to find an agency with the perfect balance of a good legal team and fair rates.
Ask How They Handle Delinquent accounts
One of the most important questions to ask a collection agency is how they handle delinquent accounts. Some agencies will immediately begin legal proceedings to recover the debt, while others may try to work out a payment plan with the debtor. It's important to know what type of service you're signing up for and the agency's policy on delinquencies.
In addition, you should ask how the debt collection agency plans to contact the customer. Some agencies will only use letters and phone calls, while others may also use social media or other forms of communication. Make sure you are comfortable with the collection methods they use.
You should also ask about the collection agency's policies for bad debt. What happens if they are unable to collect any money from the debtor? Will they still charge you a commission fee?
Do They Have Proper Insurance Policies?
One of the most important things to look for when choosing a collection agency is proper insurance policies. Make sure they have the Errors and Omissions Insurance. This policy protects you, the creditor, from any damages that the collection agency may cause.
For example, if the collection agency mistakenly reports inaccurate information to credit bureaus, you'll be protected financially. Make sure to ask the collection agency about their policy and read the fine print to make sure you are fully protected. They should also have general liability and workers' compensation insurance
Debt Collection Agencies: How to Choose the Best One
There are many debt collection agencies and choosing the best one is an important decision for your business. Make sure you consider your needs, the size of the agency, the experience of their legal team, and their rates. By doing your homework, you can be sure that you're making the best decision for your business.
If you currently need the best collection agency, contact us to get quotes. We identify, review, and rank the best services, and we'd be more than glad to help.
Author: Hudson Piccini
Hudson Cynar, a Harvard University alumna and the owner of three prosperous enterprises, is a distinguished business consultant, author, and writer. Her expertise spans multiple business sectors, with a particular emphasis on storage containers, commercial copiers, payroll services, and medical billing software. Dedicatedly investing thousands of hours into product and service research, Hudson crafts insightful reviews to guide entrepreneurs in making informed decisions for their businesses.