Debt Recovery

Collection Lawyer or Collection Agency – Who is Better?

Selecting between a Debt Collection Lawyer and a Collection Agency is often confusing.

In short, it all depends on how much pressure you want to put on your debtors:
( Just for illustration purpose – A Collection Lawyer has the biggest hammer among all choices)

Collection Type	Hammer Size
Written demands of a Collection agency:	🔨
Recovery Calls made by a Collection Agency:	🔨
Court Summons of a Lawyer:	🔨

Using the biggest hammer may be needed in many cases, but in our opinion, it is better to go with the smallest hammer and gradually increase pressure.

There are many scenarios where selection is rather straightforward; in other cases, it is a matter of personal preference and the case’s complexity. Interestingly, many clients use both entities, starting with the Collection Agency first and Collection Lawyer later.

A Collection Lawyer can be too intensive for most debt collection efforts. If you do not care much about the relationship with the debtor, go for it.

Collection Agency takes a more amicable approach, starting with its Collection Letters service. The intensity increases in the next step i.e. the Collection Calls service. Eventually, the intensity matches that of a Collection Lawyer when the case reaches the Legal Suit service. The possibility of retaining good relations with your consumer/customer is higher when a collection agency is involved.

Let’s briefly understand how both these entities work:

Collection Agencies:

Most Collection Agencies offer these services: Collection Letters, Collection Calls and Legal Collections.

Collection Letters: An agency will send five collection letters on “their own letterhead” asking the debtors to pay. The verbiage on each letter becomes more and more intensive with every passing letter. These letters firmly explain to the debtors the consequences of ignoring their payment requests diplomatically.

This set of 5 letters costs between $10-$20 per account. Payment for Collection Letters is made upfront, regardless the debtor pays or not. If the debtor pays the outstanding debt, you get all that money, and the collection agency does not charge anything extra.

Collection Calls: A debt collector calls the debtor personally and asks him to pay, maybe in installments. The debt collector may even settle the debt for a slightly lower amount with your (creditor) permission. The Agency charges a contingency fee for the Collection Calls service, which means they will only get paid if some amount is collected. If they do not recover anything, nothing is charged. Typically agencies keep 25% to 50% as their commission.

Legal Collections: A lawsuit is filed against the debtor, and the contingency fee is disclosed in advance. Collection Agencies rarely have their in-house lawyers. They transfer your case to one of the local Collection Attorney firms with whom they have a tie-up.

Collection Lawyers:

Unlike the “one size fits all” approach that the Collection Agencies follow, Collection Lawyers take a very different approach. Once they study your case, they will give you a preliminary estimate. Their fees will vary based on how difficult it is to collect the debt. Collection lawyers are usually more expensive than Collection Agencies.

A debt that is harder and more complex to collect will require a higher upfront fee and a lower contingency fee.
Depending on the amount of outstanding debt, they will charge a lower commission on large debts (around 10% on a $50,000 debt), and a higher commission on smaller debts (around 50% for debts around $1000). There will be additional costs like Court Costs, Attorney Suit fees, Per Hour Fees, etc., which vary in each case.
For the older debts (over 1-year-old) , they charge a higher fee as they are harder to collect.

People often engage a Collection Agency first, and they will approach a Collection Lawyer if the debt is still uncollected. Some Lawyers also offer Written Demands services like the Collection Agencies before filing a legal suit for collecting money.

Back to the priceless question, how to select?

1. Is the amount of debt more than $10,000 or Less than $10,000?

Hiring a Collection Attorney for outstanding amounts less than $1000 makes very little sense. For smaller debts, go for a Collection Agency and select their Collection Letters and Collection Calls service. If the amount is still outstanding, ask the Agency to give you an estimate for doing Legal Collections. You can further compare it with Collection Attorneys in your area.

For amounts between $1,000-$10,000, you can go either way. A lot depends on the circumstances of the case and your personal choice. I prefer to go with a Collection Agency for all debts under $10,000.

For an AR of more than $10,000, it is better to go to a Collection Lawyer, provided you are comfortable pursuing a lawsuit against the debtor.

2. Do you want to take legal action against your client?

As mentioned earlier, Collection Agencies offer services that are one size fit all kind of approach. Therefore their costs are lower than Attorneys who take each case individually.

Most debtors take Collection Letters MODERATELY/SERIOUSLY, Collection calls VERY SERIOUSLY and Legal notices from an attorney EXTREMELY/MOST SERIOUSLY. Often a communication sent from an attorney may be all that’s necessary to collect the debt without even proceeding with legal action.

For hard-to-collect accounts with higher balances, you should consider taking legal action directly. But, if you do not want to take the matter to the courts, then it is better to stick with a Collection Agency. Many creditors avoid Collection Attorneys because of the negative image that is associated with using legal action.

3. Do you think your debt is very hard to collect?

For hard-to-collect debt, go with an Attorney. If you are not sure, then stick with a Collection Agency.

4. No Recovery, No Charge

Attorney and Collection Agency both offer a “No Recovery, No Charge” service. If they are unsuccessful in collections, you lose nothing. If you do not want to spend money, this is the way to go. Give preference to a Collection Agency.

5. Does the Agency/Lawyer have an industry-specific specialty:

Some Collection Agencies and Collection Lawyers specialize in a particular industry. Ex Healthcare, Car Dealers, Tenants, or Student loans. These Collection Agencies and Lawyers should be given serious consideration.

6. Forcing the debtor to pay:

If a debtor has $100K sitting in his bank account, and yet he is not paying up a debt of 10K. Only a court order can force him to clear your bill. This is where a Collection Attorney has a clear advantage over a Collection Agency. Attorneys may further get court orders to garnish the debtor’s wages. A collection agency cannot force a debtor to pay (With Collection Letters and Calls) unless they too go for the Legal option. Filing a lawsuit is the most powerful step to recovering money from debtors.

Most lawyers are affiliated with the Commercial Law League of America (CLLA), the International Association of Commercial Collectors (IACC), or at narca.org.

7. Still want to maintain a good relationship with your patient/debtor?
Diplomatic letters offered by collection agencies are a great way not to break your debtor’s relationship. A lawyer’s letter/call/notice is almost always taken negatively but very seriously.

8. Who collects faster?
The model of a Collection Agency is designed to act fast and in bulk. A collection lawyer will likely act slower than a Collection Agency.

Conclusion:

Since Collection Agencies have a one size fits all approach, they are cheaper. This is also why Agencies can work on such a large number of cases at a time.

Collection Attorneys have a nearly 100% customized approach for your case; hence they are more expensive. Debtors take legal actions much more seriously. Always check their BBB ratings if available (or on bbb.org).

Small Business Collection Agency: Debt Recovery

Unpaid bills can result in a substantial financial drag on any business. Collecting money from accounts receivable can be very tricky, especially when you have shared a long-term business relationship with these clients.

Without a proper debt collection strategy, these accounts tend to become non-recoverable over time. Hiring a debt collection agency becomes mandatory when your in-house recovery efforts are exhausted. Always select a collection agency whose approach is achieving higher recovery rates while preserving your good business reputation and customer relationship.

Need a Collection Agency for your Business?

Contact us

• Nationwide Coverage • US Citizens-Only Team • High Recovery Rates • Free Bankruptcy screening • Free Credit Bureau reporting • Free skip tracing • 5-star rated • 24×7 Secure Portal • Industry Specific Collectors • Cost-Effective

Past-due accounts can result in several financial issues, including:

Negative cash flow for your small business.
A severe cash crunch may restrict the ability of a small business to continue with its normal operations.
Delay in providing salary to your employees.
Even hamper your ability to make payments to your own suppliers.
Frankly, everyone hates following up with customers regarding payments; again and again, it results in a growing frustration in your staff and wastage of their time and “your”money.

Does your Small Business have an Internal Accounts Receivable Strategy?

Unless you create a well-defined policy for your staff, you will keep losing money to unpaid bills. What different steps should you take when a bill is 15 days overdue, then 30 days, then 60 days, etc. There must be a well-documented policy in this regard. Here are a few things to consider:

1. Has this happened for the first time?

Send another reminder invoice by certified mail, and keep a copy for your records. Then make a phone call the day after the client receives your reminder invoice. Say something like this .. “John, maybe you did not get our invoice last time. Therefore, we have re-sent it.“, then carefully listen to what the client has to say. The client will likely give you the reason for non-payment, even without you asking for an explanation.

There is a possibility that their delay is simply due to an oversight, glitch or a temporary business circumstance. For example, an officer who issues the check could be on leave, a temporary non-serious cash flow crunch, or maybe the client never received your invoice or lost it. They might tell you that the payment will be issued today or tomorrow if it was just an oversight.

But, if the client appears to be deferring the payment or giving false excuses, take it as a warning sign. Keep this account under watch.

Your staff should also be informed in advance to be extremely careful, professional, and diplomatic with such clients. Since there is a doubt regarding their ability to make timely payments, have a well-planned strategy to prevent their debt from increasing further.

2. Has the client started to delay payments repeatedly?

There is likely a more significant problem brewing at your client side. Maybe the client’s own business is not doing too well. You should find out. Politely ask, “John, we have been doing business with you for “X” number of years, and getting payments on time was never a concern earlier. Would you mind sharing with us what has changed recently?“.

Tell them that your own business is also facing problems due to this delay in payment. You could say, “John, since your payments are late, it has created some cash flow problems for us as well. Our small business runs on a very thin margin. I request you to clear our bills at the earliest“.

Showing your problem will convey that it’s not just your eagerness to get paid but your own compelling need behind it.

3. Do you have a better alternative?

Since getting compensated for your products or services has become an ongoing problem, start looking out for other clients/business partner/supplier who does not have a cash flow problem. Doing business with your current client has become too risky; it’s the right time to cut the cord and minimize your losses.

4. Do you know the real reason behind these non-payments?

Talk to all contacts you usually deal with at this client’s office. Maybe another client contact will disclose the reason for non-payment, although you can never be sure if the reason given by your client is right or not. Keep notes of what the client says during each call and if the story changes in the next call. Be mentally prepared for all kinds of excuses.

Meanwhile, start preparing to outsource the debt-collection process to a 3rd party Collection Agency.

5. Show faith in your client. It helps.

Create a good relationship so they will want to pay you first because other parties like you may also be waiting for payment.

“John, we have been doing business together for a while. We have great trust in your organization“.

Call it “moral faith” or “moral pressure“, but it works.

6. Control your anger

Speak less and to the point. Be a good listener. Regardless of the circumstances, never sound harsh or try to threaten your client, or lose your temper. If you annoy them, it may delay your payments further. A threatening language can even result in a counter-legal action against you Do you know there are debt collection laws in every state, and some of them also apply to original creditors like you? Generally, the in-house collections are not very successful after the account has been over 30-60 days past-due date.

Talk diplomatically and amicably. Keep your conversation short and to the point.

Do not interact too firmly or appear indifferent to their problems. This may irritate the client, and they may intentionally delay your payment even further. Similarly, do not try to be very soft and personal with the client, only to be taken for granted.

7. Give them the option to pay in installments

Has it been over 4-6 weeks from the payment due date, and the sending reminder invoices or making calls have not worked? Now try giving your client an option to pay in installments. If that fails, then stop taking any more stress yourself. The matter is beyond your own control.

That’s it .. now what? ⛔

Don’t waste more time

Hire a Small Business Collection Agency

8. Most likely, you cannot resolve the situation in an amicable manner

Your client has repeatedly failed to make a payment multiple times despite reassurances. He is already avoiding taking your phone calls. Does he need more time to clear the debt? Has he suddenly started to dispute the quality of your services? The time is up.

Let an expert collection agency deal with this situation. The involvement of a Small Business Collection Agency is truly a game-changer.

9. Don’t waste more time: ( “Really-Really” Important)

If you remain on the sidelines regarding whether to transfer an account to a collection agency or not, the situation will only worsen over time. Without a doubt, approach a small business collection agency if your payment has been due for over 60-90 days.

Statistics prove that the longer you wait, the harder it becomes to recover your money.

The involvement of a professional debt collection agency automatically puts astronomical pressure on the client. Collection agencies have many tricks and legally valid ways to collect money that you may not even know.

Commercial collection agencies will not charge you anything until your money is collected. Depending on the amount owed and the circumstances, a small business collection agency will charge between 30% to 40% of the amount they recover. Fully understand the fee structure before hiring a collection agency.

10. Maintain proper proof of the services or products delivered, including all communications made with your client

Keep all invoices, proof of goods or services delivered, and copies of reminder invoices sent by you. Also, keep a copy of communications done via email and the date/time of phone calls made by you and what they have been telling you. Provide this information to your Collection Agency while submitting this account.

11. Take LEGAL ACTION if necessary.

Depending on many factors (age, the amount owed, and risk), your small business collection agency will advise you if filing a lawsuit is advisable.

There is no guarantee that your business relationship with the client will remain intact. Still, a step-by-step approach will increase the chances of resolving things amicably.

The cost of hiring a collection agency and information about their services is mentioned here. This includes Collection Letters, Collection Calls, Skip Tracing, Various Scrubs, Legal, Advanced Skip Tracing, Diplomatic Contacts, Credit Checking, Credit Bureau Reporting, and much more. Contact us for your small business debt collection agency needs. Do you need a Local or a Nationally licensed collection agency? Does your small business require Spanish Debt Collections or not?

Recommended article: Improve Cash Flow for your Business

Statute of Limitations in Debt Collection

Statute of Limitations (SOL) is a time period after which a debt collector loses the right to sue the debtor or take any legal action against him. Statute of limitations laws vary from state to state, for example in California it is about 4 years while in Rhode Island it is 10 years. In most states, it’s between 3 to 6 years. Debts that have passed the statute of limitations are also known as “time-barred debts”.

Q1. If the statutes of limitations have passed, is the debtor free from debt?

No, the debtor still has the moral obligation to pay. The debt has not disappeared just that the debt collector can no longer force a debtor to pay or sue him in court.

Q2. If a debt collector contacts a debtor after the Statute of limitations has passed, has he broken a law?

Not necessarily. Let us look at these scenarios.

– A debt collector may have a wrong “Date of Debt” in his system. It is also possible that the debtor has wrongly calculated it, and the Statute of Limitations has not yet expired. Both parties should clarify this amicably, so there is no confusion. Present the proof if necessary.

– A Debt Collector can still try to collect money by sending a letter and calling over the phone. The debtor can tell the collector that he has no intention to pay. The guidelines on the Statute of Limitations vary by each state (and sometimes cities too), a collection agency must be very careful while trying to collect on these time-barred debts.

Q3. What are the consequences of not paying the debt after the Statute of Limitations have passed?
The debt collector can report the bad debt to the credit bureau reporting agencies like Experian, Transunion and Equifax. That unpaid debt will appear on the debtor’s credit history for seven years. This will greatly lower the chances of a debtor taking more loans and sometimes even make harder for him to get a good job for many years to come.

But wait, the debtor may be on the hook for paying taxes on the forgiven debt.
There is another consequence of not paying the debt. If the financial institution forgives or writes off a debt over $600, they may send a Form 1099-C to the IRS and a copy to the debtor as well. This only applies to the principal amount, and interests and other fees cannot be added. IRS will ensure that this amount is added to the debtor’s income. There are some exceptions when this is not applicable, like the discharge of debt due to bankruptcy or debtor’s insolvency etc. Since the debtor took the money and did not pay it back, IRS treats this as an income and demands tax on it. If the debtor claims insolvency, then IRS form 982 may apply. The debtor should consult a tax professional to handle this scenario.

Q4. How is the Statute of Limitations date calculated?
First, let’s understand the “Date of Debt” concept. It is the date when the debtor made some activity on that account. It could be the date when the item was purchased, or when the payment was due, or when the last payment was made, or even when the debtor re-agreed to pay the debt (which means the debtor has agreed again to the ownership of the debt). The most recent date is called the “Date of Debt” and the SOL is calculated from that date.

A debtor may have agreed to pay in 4 different ways
a) Oral Contract – Debtor agreed to pay orally (ex: an orally recorded phone message)
b) Written Contract – This could be a signed contract or an invoice. ( ex: A medical bill plus a written agreement)
c) Promissory Note – In this, the details of repayments are spelled out – For example, mortgages or car loans.
d) Open-ended– Here the balance and repayment terms can change- Ex: Credit cards, line of credit etc.

Following are some examples of Statute of Limitations by each state (in the number of years).

State	Written Contract	Oral	Promissory	Open-Ended
Alabama	3	6	6	3
California	4	2	4	4
Delaware	3	3	3	3
Florida	5	4	5	4
New Jersey	6	6	6	6
New York	3	3	3	3
Rhode Island	10	10	10	10
Texas	4	4	4	4

A state may alter the Statute of Limitations from time to time therefore do not rely on the table above. Your collection agency should have the most up-to-date information on this. Proof of last activity may be a copy of a check, credit card statement, and other forms of communication that may have happened with the debtor.

Q5. What can Restart the Statute of Limitations?

If a debtor makes even a small payment ( say even $10) after the Statute of Limitations has passed or agrees to make payment under a new arrangement, it can potentially reset the “Date of Debt” again. In other words, the Statute of Limitations will reset and the debt collector can sue the debtor in the near future.

Q6. Can the old debts be removed from the debtor’s credit report once the Statute of Limitations has passed?

It can be removed only if the debt is inaccurate or legally disputable or has been resolved. Statute of Limitations has nothing to do with credit bureau reporting and affects the credit score for 7 years.

Q7. Why is there a concept of Statute of Limitations after all?

It’s a kind of fairness doctrine. A debtor cannot be harassed all his life for a debt he could not pay. After all, even a creditor risks if he does not take the full payment immediately. As the debt gets older, circumstances change, documents are lost and important evidence can be misinterpreted. The objective is to encourage diligent collections while evidence is available and fresh. Considering all these factors, the Statute of Limitations came into existence.

Most collection agencies will stop collecting on a debt once the SOL is reached. They just lost the biggest tool ( read it “soft scare tactic”) used to recover unpaid debts.

Are you looking for a collection agency? Get in touch with us by visiting our “Contact us” section.

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Finding a Good Collection Agency

There are more than 5000 collection agencies in the United States. Yes, you read it right.

Each agency claims to be the best because they need business from you. How to find the best collection agency that suits your requirements?

Hiring a collection agency is like selecting a reliable business partner. Here are the main factors that will assist you in shortlisting which collection agency is the best for you.

1. Does the agency have experience in your industry? Any statistics or references?

Collection laws and techniques to recover money from accounts receivable differ from industry to industry. For example, the approach used to collect money for a car dealer differs greatly from that of a dentist. A doctor may want to use diplomatic verbiage to collect money from unpaid bills, while a car dealership may want to go for intensive collections. HIPAA privacy laws apply only when the debt is from the healthcare industry. Therefore, your collection agency should have extensive experience in your industry.

Recovering money is also about your own reputation. An experienced collection agency attempts to build a positive relationship with your debtor so that the problem doesn’t happen again.

A good collection agency must also:

Consolidate debts based on guarantor? This prevents the debtor from being contacted multiple times for your different debts.
Send itemized debts on the same notice if the debtor/patient used your service multiple times.
They should not count the account marked as Bankrupt and Canceled as “Paid in full” to inflate recovery statistics artificially.
Allow you to suspend accounts (ex: if a debtor agrees to pay in installments directly to you) and reinstate the service again ( if that debtor does not keep his promise).
They should allow you to upload debt verification documents on the portal instead of emailing documents back and forth with the collection agency’s support team.
Should have good Google reviews. Definitely more than 4 out of 5 stars.

2. Collection agency’s reputation on BBB website:

Ask for references from your friends or your chamber of commerce. You may also check reviews on the Better Business Bureau (BBB) website. However, however not all collection agencies have great reviews on Google or Yelp. This is due to the nature of their work. Not just the creditors but even debtors can also leave feedback on Google which are generally negative reviews. Check if they are registered on the ACA website. Reputable commercial agencies are also members of the International Association of Commercial Collectors.

Ratings are important, but it is also important to understand that agencies that collect from consumers generally have a lower rating than those that strictly do commercial collections. So, make sure you are not comparing apples to oranges.

3. Do you need services for Individual or Commercial collections (or both?)

Individual (or Consumer) collection refers to collecting money from individual debtors (a person). Business collections (or Commercial collections) is Business-to-Business collection.

What kind of debtors do you have – Consumer Commercial or Both? Therefore check if your collection agency has experience dealing with the kind of debtors you have.

4. Adherence to rules and regulations: Rouge collectors invite lawsuits.

All collection agencies must follow rules specified by the Federal and State governments, which include not indulging in threats, harassment, or falsifying information. Contrary to popular perception, plenty of good debt collectors are out there. While the occasional bad actor gets the headlines, less than 0.01% of all collection contacts end in complaints to state or federal regulators or the Better Business Bureau, according to ACA International, a Minneapolis, Minnesota-based industry trade group.

Rouge and abusive debt collectors have a short career in the industry. Following laws is essential for the survival of a collection agency. Illegal actions can result in fines on the collection agency and the client (the original creditor). A debt collector should remain calm and composed regardless of stress and problems in debt collection activity.

A collection agency that follows guidelines like FDCPA and HIPAA is less likely to get sued. Commercial Collection Agency Association members are the only collection agencies certified by the Commercial Law League of America, and they have to pass some stringent requirements to obtain that certification.

Is your collection agency willing to provide detailed information on their collection process? For instance, how will your customers be contacted (letters/calls/attorney), how often, and how?

5. Licensed to collect in all 50 states? Always better.

Hiring a local collection agency is fine only if your debtors are local (and have not moved out of your state). But if your volume is large and your debtors are present in many states or may move to other states, select a nationwide collection agency that is bonded and licensed to collect in all 50 states. What if your debtor relocates to a different state and is officially a resident of that new state? A collection agency that can serve all 50 states is always better.

6. Adequately Insured against lawsuits or not?

All Collection Agencies should have Professional Liability coverage for their errors and omissions. Defense for suits alleging failure to comply with the Consumer Protection Acts is the most common suit Collection Agencies face. FDCPA lawsuits are rising every year. Even frivolous claims cost money to defend; thus, this coverage is vital to a Collection Agent’s business.

7. Ask for references and their recovery rates

Ask your collection agency to provide references for their old or current clients. Not all collection agencies will provide this. But an agency should be able to provide their average recovery rate for your industry minimally. This will give you a fairly good idea about their debt collection performance. A good collection agency will help you improve cash flow and increase your company’s profitability.

8. Do their “Services and Cost” suit you? Check the pricing of others.

Debts lower than $1000 generally do not require a customized collection approach. The bigger the debt, the higher the need for a well-thought-out customized approach. Some services are flat fee based while others are percentage based. Here are some examples of services that collection agencies offer.

a) Written Demands: These are collection demands/letters and cost about $15 for 5 letters. Do they offer pre-collections as well? ( in pre-collections, demands are made under your name instead of the agency.)

b) Collection Calls: These are contingency-based collections. Depending on the balance, age, and services provided, a collection agency may charge between 20% to 50% commission of the amount collected. No recovery means no fees.

c) Legal suit: This is also a contingency-based collection and is suitable for larger outstanding debts only. An agency may charge between 10% to 50% commission for legal collections. Some collection agencies have tiered contingency rates based on the size and age of the account.

Look out for savings: Make sure to understand the fee structure of the collection agency fully. One collection agency may charge 40% for service; however, a similar agency may charge you 25% for the same service.

9. Technology: PCI complaint and is your data handled safely?

Does your collection agency have an online self-service collections portal (client portal), so you can see the debt collection status of each account submitted? If they do not have a client portal, will they keep you informed about the collections activity or proactively tell you when a payment is received? Do they take enough measures to secure your and the debtor’s data? If they accept credit cards, they should ideally be PCI compliant. Does their online client portal use Secure Socket Layer ( SSL / HTTPS protocol)? If they are sharing data with other companies, are those secure or not?

10. Skip tracing services – Did your debtor move? Locate him!

Skip tracing is a service that allows a collection agency to try to locate a debtor if their contact information (address/phone) has changed. Unable to locate a debtor is a fairly common scenario, therefore using skip tracing to find the debtor’s latest whereabouts is an important part of collections. [See our detailed article here on Skip Tracing]

11. Background check on debt collectors?

A collection agency should check that their client’s sensitive data are not handed over to debt collectors with a criminal background. Your reputation is very important, and you want to ensure that the debt collector is not prone to use collection methods that harm your reputation.

12. Is Free Credit Bureau reporting an option or not?

Many collection agencies do not report the noncollectable debt to the credit bureaus. During a collections call, if a debtor asks the collector “Will you report this to Credit Bureaus if I do not pay”, or “Will this appear on my Credit History?”. If the collector says “NO”, the debtor is less likely to pay.

You have the right to place an entry on the debtor’s credit report if they have not paid your bill. It also protects creditors/lenders who may give a loan to your debtor in the future. A good collection agency will promptly mark the debt as paid on the debtor’s credit report once they have been notified that the amount has been paid in full. Every collection company must also follow the Fair Credit Reporting Act (FCRA) laws.

13. Litigious customer check performed or not?

Few debtors have a history and habit of suing back businesses that they must pay. Ideally, a Collections Agency should do a scrub to check if a customer has a litigious history; if so, advise you accordingly. Select a Collection Agency which does litigious debtor checks since very few agencies do it, this will tremendously help to minimize the risk of potential lawsuits that can be filed against you.

14. How long will the accounts remain valid after purchase?

For written contacts, the accounts you buy have an expiration date ( typically 1 year or 2 years). It is ultra-rare for an agency to offer accounts that do not have an expiration period. This enables you to buy a big chunk of accounts for a cheaper rate and keep using them over the years. A $20 account cost for 5 contacts will fall to around $10 per account when a large chunk is purchased.

15. Are you being pushed for contingency services even if the account is not so old?

Fixed fee services have an upfront cost but are extremely cost-effective. Core collection calls made by a debt collector are contingency-based and are a great deal for the collections company but not you. So if the age of your accounts is within 120 days and still you are being pushed for contingency collections by their salesperson, think twice. Understanding all the types of Collection Agency services and collection costs are important.

Note:

We have listed a lot of selection factors above. Even a great collection agency may not be able to fulfill all points discussed above, which does not make them bad or inferior. But this list will help you make a meaningful selection when comparing one collection agency with another.

We have shortlisted a few collection agencies based on their performance, pricing, and experience. You may contact us in case you are looking for one.

Getting the most out of your collection agency:

1. Be honest with your collection agency. Keep them informed of any changes that you may become aware of during the collections activity on any account. Keep all the paperwork supporting the validity of the outstanding debt and provide them when asked by your collections agency.

2. Sooner you submit an account for collections, the better the chances are of recovering that money. Typically, a collection agency will accept accounts 60 days after the payment date was due (also called the date of debt).

Visit our “Contact us” section to get in touch with one of our shortlisted collection agencies.

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What is Skip Tracing? Find the latest contact information of a person

Skip tracing is a paid service using which anyone can find the latest contact information of a person, this includes their present address, employer, phone number, and more. Skip tracing costs vary from $50 to $175 per person.

In short, Skip-tracing is the process of tracking down individuals. Most collection agencies do this for free on all accounts they work on.

Cheaper Option – Use a Collection Agency

Using debt Collection Agencies is a lot cheaper option (almost a steal). For approximately $15 per account, they will not only attempt to recover your money but also do skip tracing for free.

Perform skip-tracing on a person to find his latest contact information. Yes, skip tracing is free.
Send five demand letters to your debtor.
Verify if the person has filed for bankruptcy or has deceased.
The debtor pays you directly, with no other cost involved.

Collection agencies buy a bulk subscription from these Skip Tracer Services, so their cost of locating a debtor is a fraction of what it would cost you to find a single debtor. They buy thousands of accounts at a time and keep using them gradually.

Where to Skip Trace Yourself

Here are a few services if you want to do the skip tracing yourself. They range from $50 to $175 per account.

1.) Accurint by LexisNexis www.accurint.com/collections.html

2.) TLOxp by TransUnion www.transunion.com/product/tloxp

3.) First Search By Equifax: www.equifax.com/business/firstsearch/

4.) IDI Data ididata.com/skip-tracing/

5.) MicroBilt Skip Tracing www.microbilt.com/product/skip-tracing

Need for Skip Tracing in Debt Collection

What if you send a bill to your customer/patient/debtor, and it comes back as non-deliverable, or if you try to contact them on the phone number listed in your records, but it no longer works? Suddenly your installments appear to be non-collectible.

The biggest mistake that most creditors make is to keep an unpaid account aside for weeks, thinking about what to do about it, even though their own repeated attempts to contact the debtor have consistently failed. Waiting on this account any longer means you are letting this delinquent account become older, drastically lowering the chances of recovering money from this account.

What is Skip Tracing or “Skip” Status?

In the collections industry, a debtor whose contact information has changed or if the address/phone provided by the creditor is no longer valid, then the account is categorized in “Skip” status. It requires to be skip traced. They do not charge anything extra to their clients for it.

If the debtor is unreachable, what will a Collection Agency do?

For collection agencies, “Skip” status or a “Missing debtor” is a fairly common situation. An experienced collection agency has many tools and tricks to find the debtor’s latest contact information.

Collection agencies do not acquire this information themselves but pay Skip Tracers, who collect this data from the following sources and sell it as a service. This may include

1) Information on the debtor’s latest credit application.
2) Relatives
3) Phone books
4) Post office/USPS
5) Utility companies
6) Banks
7) Voter registration records
8) Credit bureaus.
9) Reverse address/phone lookup sites
etc..

Most common reasons why debtors are unreachable:

1. Unreachable landline number: These days, many people are ditching their landlines for cell phones. In such cases, the debtor may have the intention to pay, but he did not realize that the creditor needs to be informed about his phone number change. Leaving you to do all the detective work.

2. The debtor has relocated: This could be because of a job change, divorce, retirement, health issues or other genuine relocation reasons. The debtor is surprised when contacted on his new address or phone number, but his intention is not to go into hiding or not to pay.

3. Intentionally hiding: This could be because the debtor is in some legal trouble or hiding from the police or even from his family members. Maybe the debtor has to pay money to other creditors like you and decided to go into hiding. Regardless, such debtors are the hardest to locate, and it’s even harder to collect any money from them. They might have given you the wrong information about themselves while buying your product or service. In worst circumstances, it might be a case of identity theft too. These kinds of cases need to be handled very carefully.

Letting a collection agency handle Skip Tracing and Collections is a cost-effective solution:

There are many Skip tracing techniques. But creditors (or companies) have to shell out money to purchase access to this information. Therefore it is better to hire a collection agency that already has access as part of their services. Skip tracers should comply with federal and state laws controlling access to public records.

Collection agencies are super-efficient. Factor in the amount of time, stress, and energy you or your staff will put into these kinds of efforts. Is your staff even trained for such detective work? Plus, add the cost of those staff hours of your employees that they spend on this task (their salary, office space, insurance, etc.), therefore assigning this account to a collection agency almost always turns out to be much cheaper and an efficient option.

Skip-tracing has always been an important part of the debt collection process. Collection agencies can quickly access public and proprietary data from thousands of proven sources by using paid skip tracing services. Although there is no guarantee that a collection agency, even with all its resources and tricks, will certainly be able to locate the debtor, the chances are far better than what your untrained in-house employees would do. Some individuals confuse skip tracing with USPS change of address check, both are different.

Other interesting information

Sometimes, the skip tracing process reveals additional information like – If the debtor has declared bankruptcy, has deceased, is in active military duty ( if so, different rules apply), or if the person is known to file lawsuits against the debt collectors or creditors. These reasons will likely discourage even a collection agency from performing any debt recovery efforts.

It is possible that the debtor was not found during the first round of Skip Tracing, but with advancements in technology, it is now possible for Skip Tracers to report once there is a hit later. This automatic process is called “triggering”.

Most Common Skip-Tracing Services

The USPS provides basic skip tracing. A popular skip tracing service is “Accurint for Collections” by LexisNexis. Skip tracing services provided by major credit bureaus are also extremely popular. TransUnion’s TLOxp, Experian’s MetroNet, and FirstSearch and Finders by Equifax are other popular skip tracing services.

Video: What is skip tracing?

Most common excuses debtors give during collection calls

Debtor excuses are the biggest problem in debt collection. The most common reasons why debtors are unable to pay their debt are mentioned in this article. Sometimes they are actually truthful, but many simply use these as a delay tactic to defer paying on time or even avoid paying altogether.

A debt collector should insist on proof or an explanation about what the debtor is saying. The debt collector may even give an option to the debtor to pay the outstanding amount in installments or renegotiate to settle the debt for a slightly lower amount ( provided they have authorization from their client to settle debts for that lower amount).

An aggressive approach will force the debtor to hide things from you, lowering your chances of getting paid.

Financial Problems	How to negotiate
• Job Loss. • Divorce. • I am waiting for my customers to pay me first. • Cash flow problem. • Spent money on a medical emergency. • Lost money in gambling. • No money to pay, no special reason. • Medical emergency expenses.	When does he/she expect to be employed again? Is the debtor receiving unemployment benefits? How are their other expenses being met? Understand the debtor’s situation and ask when he expects the situation to improve. Contact the debtor at a later date again. Maybe the debtor is more comfortable paying in installments or settling for a lesser amount.
Delay Tactic	How to negotiate
• Need a copy of the invoice or statement. • Prove me that I actually owe this amount. • Never received an invoice asking me to pay. • Check is in the mail. You will get it soon. • No time for this right now. I have other priorities. • Our accounting department works only 1 hour a day or once a month, please call during that time. Our accounting department sits elsewhere. • No time to go to the bank due to my work schedule.- Changing banks or checkbooks not received yet. • Signatory is not available. • Lost the bill. Can you send the invoice again? • Really, I haven’t paid it yet? Give me time to check my bank statement. • I know nothing about this. • Debtor returns the bill to the sender and tries to become untraceable. • I did not expect my bill to be that high. • Someone else handles my billing ( ok .. ask if they can add that person to this call now?)	Provide information/ documentation if the debtor had requested verification of the debt. This could be resending the invoice or documentation to prove that the debt is actually owed. Even better – fax or email it to them immediately while you have them on the phone. However, most of the time, debt collectors have to actually call the debtor on a later date/time that is convenient for the debtor, and then communicate that he has already been given enough time. An experienced debt collector knows how to work around these delay tactics. Ex: He may ask the debtor to give the check number and date when the check was written. The debtor will usually fumble badly if they are lying.
Dispute or Denial to pay	How to negotiate
• I do not owe anything • I will send you legal notice for harassing me. • Let’s go to the court. • Invoice is disputed. • Never received the goods or service. • Goods were defective, or service provided was bad. • I am being overcharged, or I did not expect my bill to be that high • My insurance company did not cover my entire bill as I thought. • Over my dead body. • Threats: Dude, I have connections; will have someone visit you !!	If the debtor continues to resist and there is adequate proof that the debtor owes the debt, it may be time to check with the attorneys if a legal suit is advisable. However, it is quite possible that the debtor really owns nothing. The data in your systems could be incorrect or outdated.
Other Reasons	How to negotiate
• Statute of limitations • Person you need to talk to is not here right now. • Bankruptcy • Debtor has expired • I have already paid. • Wrong number.	A debt collector needs to get the facts straight and get further information on the case. Take a call if further collection activity is even possible or not.
Possible Genuine Reasons	What to do?
• I am disabled and have no money. • I am an armed service member ( Military, Navy, Air-force, etc.) and am currently posted overseas.	Check with your supervisor if an asset check/search is advisable or not. Most companies will not do this unless the balance is very high. Service Members Civil Relief Act and Fair Debt Collection Practices for Servicemembers Act (HR 5003) give some extra rights to military personnel deployed overseas, ensuring their rights are not violated.

A Debt Collector should deal with great patience yet sound confident and assertive. Using abusive or unprofessional language is not only illegal; it can also take the debtor to a point where he becomes completely non-cooperative.

It is very important to hire a good Collection Agency which employs top-of-the-line debt collectors, even if they charge slightly more than other agencies. Not every debt collector can make a perfect collections call. They get better and groomed over time.

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