Debt Recovery

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industry, a debtor whose contact information has changed or if the address/phone provided by the creditor is no longer valid, then the account is categorized in “Skip” status.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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Consumer vs Commercial Collection Agency : Differences

Commercial Collection Agency	Consumer Collection Agency
B2B Collections or Corporate Collections (Both Creditor and Debtor are business entities)	B2C Collections or Individual Collections (Creditor is a business, and debtor is a person)
Lower Contingency Fees	Higher Contingency Fees
Higher Recovery Rate	Lower Recovery Rate
Less stringent debt collection laws	Strict debt collection laws enforced
Customized collection approach for each case	Standard proven techniques, less customization
Attorney gets involved early in the collection process	Attorney gets involved in only a few cases
No FDCPA, No 30-day dispute period	FDCPA Laws and a 30-day dispute period applies
IACC accreditation preferable	ACA accreditation preferable
Statute of limitations generally do not apply	Federal laws regarding Statute of limitations apply
New CFPB guidelines are not applicable	They came into effect on Nov 21, 2022

Need a Commercial collection agency with 20 years of experience? Contact Us

The term “Commercial Collections” refers to the debt collection activity where the debtor is a business entity. The business can be a sole proprietorship, partnership, LLC, Inc, MNC, etc. Commercial debt collection is also called business-to-business (B2B) debt collection.

Difference between Commercial Collection and Consumer debt collection

One may wonder, when a “debt is a debt, ” why do we classify it as a Commercial or a Consumer debt? When it comes to debt collections, they are treated quite differently, primarily due to the difference in debt recovery laws instituted by the US Government.

1. Fair Debt Collection Practices Act (FDCPA): These are comprehensive debt collection laws that the U.S. government has specified for collection agencies. They must be followed while collecting the Consumer debt. The strict laws of FDCPA protect an individual from any illegal harassment from a Collection Agency. Some states have their own set of laws, but most of them follow the federal FDCPA version. FDCPA rules prohibit all forms of harassment, threats and deception.

There are additional laws that may be applicable, ex: Fair Credit Reporting Act (FCRA), Telephone Consumer Protection Act (TCPA), and Service-Members Civil Relief Act (SCRA).

Medical collections are additionally subjected to the Health Insurance Portability and Accountability Act (HIPAA). Creditors can share only limited patient information, and collection agencies should securely handle the data.

Important Note: Commercial Debt Collection is NOT subjected to the FDCPA; this law applies to only Consumer Debt Collections. There are a separate set of fair debt collection guidelines which apply to commercial collections, however they are not as stringent as Consumer debt collections.

Examples of Consumer debts include – unpaid credit card bills, mortgage bills, student loans, and medical debt of an individual. Due to the higher risk and effort involved in recovering money from Consumer debts, collection agencies charge a higher fee for Consumer collections than for Commercial debts.

2. A commercial debt collection agency treats every case differently. Scenarios change depending on the type of business. For example, the approach involved in collecting money from a hospital will differ from that of a car dealership. Collection Agencies maintain a delicate balance between recovering the debt and maintaining good business terms between the parties. The average balance of commercial accounts is generally much higher when compared to consumer debts. Commercial collection agencies are highly specialized in their field.

3. A 30-day dispute period does not apply to Commercial Collections
When the debtor is a consumer, a collection agency has to provide a 30-day dispute period regarding the debt. During the dispute period, a consumer can also ask the Collection Agency to prove that he indeed owns the debt (also called as the “verification of debt”). However, a commercial collection agency can start the recovery process right away.

4. The commission fee is lower for Commercial Collections:
The contingency fees of a commercial collection agency vary from 10% to 50%. For accounts over $500K you can negotiate a collection fee of about 10%. For accounts about $50K, the fee is around 20%; for accounts lower than $1K, it’s around 50%. It is always around 35% to 50% for Consumer Collections and averages around 40%. Even with lower contingency fees, a Commercial Agency can make more money per case due to higher balances. If a commercial debt is over one year, 5% extra fees may be charged.

5. Other notable differences:

Bankruptcy laws are different for individuals and companies.
The way Credit Check is run on individuals vs companies is vastly different.
A good commercial collection agency would likely be registered with the International Association of Commercial Collectors (IACC). Collection agencies dealing with consumer debt are affiliated with the Association of Credit Collection Professionals (ACA)

The primary advantage of hiring a commercial collection agency is their extensive knowledge of business laws. The laws presume a business owner to be savvier than the average consumer. It is assumed that business owners have a higher level of sophistication and accountability.

Attempting to collect the money while following all the debt collection laws can be challenging for normal people.

Video:

The commercial debt collection process generally includes these steps:

Assigning the case to a Commercial debt collector, background investigation, skip tracing, credit analysis, finalizing a collection approach, and payment plans. A commercial law firm ( or an in-house commercial lawyer) will get involved if everything else fails.

If your debtors are from across the USA, it is better to work with a nationwide collection agency licensed, bonded and qualified to collect in all 50 states. Check if your commercial collection agency follows the latest data security techniques, encryption, and technology because, in case of data leaks, you may be held liable by your own customers.

What is a Debt Collection Agency?

Collection Agency is an organization that attempts to collect money from individuals (or businesses) who have not paid their bills on time. Accounts are typically transferred to them after they have been over 60-90 days past due.

What kind of debt can be assigned to a debt collection agency?

1. Unpaid medical bills of a doctor or hospital.
2. Services or products which were sold but were not fully paid.
3. Mortgage debt, credit cards bill or other forms of bank delinquencies.
4. Unpaid phone bills, gym bills or other recurring membership fees.
5. Unpaid installments of car loan, student loan or bank loans.
6. Other interest and penalties.

Overall, you can initiate collection activity for almost any past due account for which you are legally entitled to get paid for and have sufficient proof to back your claim.

Example

Let us assume, you are a ‘dentist’, and your patient agreed to pay for your services in 5 installments. But the patient has stopped paying after the 2nd installment. Your gentle reminders to the patient have not resulted in any success. Would you write off the unpaid amount or would you go after the patient by trying harsher measures? It is advisable to avoid both. Taking intensive measures could even result in counterproductive action against you.

Now you approach a Collection Agency to collect your past due amount from your patient (or say, Debtor). Depending on the type of service you select, a Collection agency will attempt to collect the outstanding debt and charge you a fixed fee or the percentage of the debt collected. (Read: Services that Collection Agencies offer).

Should I try to collect the debt myself?

Sure, if your staff has time to do a few polite reminder calls or send bills to the debtor, and then time to do the follow-up for the same, try it out. But be extremely careful, respectful, polite and patient during your communication with the debtor. Most likely you will realize that too many man-hours are being spent and your staff is probably trained adequately to handle these situations.

Collection agencies are not only experts in collecting debt, the moment your debtors get to know that a professional debt collection agency is involved, but they are also more inclined to pay off the outstanding debt at the earliest.

Documents to prove you legally own the debt:

There are thousands of collection agencies in the United States, big and small, and each has a different way of working and the services they offer. In most cases, the collection agency will not ask you to submit all proof (or paperwork) of the outstanding debt initially, they will ask you to provide that if and when needed. For example: If the debtor disputes the charges. A collection agency will normally start the collection activity by asking only the basic information like Debtor Name, address, phone, amount due, bill/reference number, date of debt and sometimes debtor’s SSN. At all times you should maintain sufficient proof of the outstanding debt.

Additional information:

As mentioned earlier, collection agencies are experts in collecting debt, that’s what they do all year long. They ensure that the demand notices being sent out with maximum impact (collection letters, collection calls or legal notices), and that debt collection laws are followed, it includes “Fair debt collection practices act” specified by each state.

Before a collection agency signs you up as a client or starts accepting your past due accounts for collections, they will ask you to sign a legal agreement (on paper or an online contract). This agreement authorizes them to start collection activity on your behalf. Their agreement also includes important disclaimers and some standard legal stuff.

It is normally advisable to start collection activity after it has been over 60 days from the Date of debt, or that date when the payment was due. The sooner you submit an account for collections, the chances of recovering your money are significantly higher.

Defaulted debts are often reported on the debtor’s credit history, and it stays there for several years.

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How do Debt Collection Agencies work?

Businesses often transfer their overdue accounts receivable to a professional Collection Agency which their in-house staff is unable to collect. Collection Agencies are experts in recovering debt. Their well-trained and well-equipped team of debt collectors can recover money from even those hard-to-collect accounts.

Their role in the financial ecosystem is crucial. Without them a very high percentage of the outstanding debts will never get paid off, leading to heavy losses for businesses and medical practices. Of course, no Collection Agency will recover money from every account assigned, but they try hard using proven recovery techniques.

Types of Debt Collectors:

1. “Collection Agencies” – Agencies that act as a middleman between the creditor and debtor using standard recovery techniques. They attempt to collect the debt in full. Some agencies operate in one state only while others have a nationwide license.

2. “Debt Buyers” -Debt buyers buy debt that is deemed unrecoverable. Debt buyers buy unpaid accounts by paying pennies on the dollar and readily agree to settle the debt even if a way-lower payment is offered.

3. “Collection Lawyers“: Unlike Collection Agencies, they do not have a single collections approach for all accounts. They study each case, give a customized solution and quote a fee accordingly.

Here is a detailed explanation for each of them.

1. Collection Agencies

When a creditor approaches a collection agency, he is offered three types of collection services: Collection Demands (Letters), Collection Calls and Filing a Legal Suit.

a) Collection Letters (Fixed Fees Service- Accounts purchased in advance) – A collection agency sends up to 5 collection letters to a debtor and charges between $10 to $25 upfront per account for this service. Collection letters are sent every ten days or so. They run a “USPS-Address-Change” scrub on these accounts to ensure the letters are mailed to the latest address of the debtor. This is also called skip tracing.

They also check if the agency/creditors are legally prohibited from collecting a debt. For example, when a debtor has been granted bankruptcy protection, or if he has deceased.

During the Collection Letters service, all amounts go directly to the creditor, the collection agency keeps nothing other than the small flat fees they had charged earlier (roughly $12-$16 per account). You can also add the late fees to the amount due if your contract permits.

The creditor must report all payments made by the debtor directly to them so that the Collection Agency can print the correct (lower) outstanding amount on the remaining letters. They will completely stop sending letters in case the amount has been Paid in Full or deemed uncollectible through written-demands and may require stronger action.

Collection Letters service is usually recommended for debts that are within 30-120 days past-due date. They give far superior results than your own in-house collections. You may check our sample debt collection letters to get an idea of what the debtor receives from a Collection Agency.

b) Collection Calls (Contingency-based, No Collection – No Fees) – This is where an actual human being (debt collector) picks up the phone and starts making phone calls to the debtor. This is a contingency-based collections service and is usually recommended for debts older than 120 days, or if the Collection Letters service did not recover the debt.

A Collection Agency would usually not accept an account for collections if the debt is older than 3 years. They also specify the minimum amount of debt that can be assigned for this service, usually, there is a $100 is the cutoff limit.

With their extensive experience, debt collectors are able to make a perfect collections call. They are able to handle debtor excuses way more professionally, patiently, and smartly than your own employees. Most agencies hire multilingual staff to handle Spanish collections if required.

The collection agency keeps 33% to 50% of the amount collected per your agreement and passes the remaining money to you (the creditor). Do not always fall for those ultra-low-cost collection agencies, because their recovery rates may be a lot lower. If a collection agency is near you do not hire them just because of that reason, in debt collections, the location does not matter.

Hiring a good collection agency is really important to get superior collection results.

c) Filing a Legal Suit (Contingency based) – This is the third type of collection service where a Debt Collection Agency’s attorney (or a partner attorney) sends legal notices to the debtor. The attorney may even try to collect the outstanding amount against the assets of a debtor or garnish his wages. Assets could be the debtor’s bank account, brokerage account, and even against certain types of real estate that the debtor may own.

Collection agency usually takes a cut of around 25%-40% for these kinds of cases. These accounts should carry high-value debts to justify the cost of hiring an attorney.

Collection fee can be negotiated with the collection agency in case the outstanding amount is in thousands of dollars or if it is a B2B debt (commercial/business debt).

In the case of B2C debt (individual/consumer debt), there is usually no room for negotiation. Individual debts are harder to collect, and unlike B2B accounts the B2C debts are subjected to far more stringent collection laws.

2. Debt Buyers:

Debt Buyers purchase bad debt in bulk and pay a little money to the creditor for it. The collection activity starts after the purchase. For example, if the outstanding debt on an account is $1000, a Debt Buyer may buy it for $50 only. Accounts are usually settled at a lower price point. For example using the above scenario: A debt buyer will happily settle the account even if the debtor offers to pay $200, for a nice $150 profit. The Debt Buyer keeps 100% of the money recovered, and does not need to share anything with original creditors.

3. Collection Lawyers:

Collection activity is not always done by a collection agency, many lawyers are in this industry as well. They study each case, give a customized solution, and quote a fee accordingly. In this case, a debtor will receive a legal notice or a phone call from the lawyer’s office. If there is a co-signer on the debt, the collection activity can be made on the co-signer as well.

Fair debt collection laws:

There are several “Consumer protection laws” and the “Fair Debt Collection Practice Laws” that all debt collectors are supposed to follow during consumer collections. Here is the list of all debt collection laws.

A debt collection agency should be respectful, law-abiding and truthful. They should not discriminate against people based upon gender, race, age etc. They should not contact you in odd hours, like late evenings or very early mornings. They cannot try to threaten you bypassing statements like “If you do not pay, the police will arrest you“.

If the collection agency determines that the debtor cannot pay the debt in full, they can settle an account for a slightly less payment if the creditor allows doing so. A debt collection agency may also allow the debt to be paid in monthly installments. Debts do have an expiry date, there are some statute of limitations beyond which a collection agency is not allowed to sue a debtor. For example, many states in the USA, have a rule that a debt older than 4 years cannot be collected upon. Other states have a 3 or a 10-year cut-off period.

Credit Bureau Reporting

Non-payment of debt can be reported to credit bureaus ( Transunion, Experian and Equifax) by the collection agency if the original creditor wishes to do so. This negative entry on the debtor’s credit history report can be quite damaging because the chances of getting a new loan goes down significantly for many years. He may also face problems in changing jobs as many employers run credit checks on their prospective employees.

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Importance of collection agencies

Due to the nature of their business, debt collection companies have a bad reputation. FTC gets the highest number of complaints from this industry. But see the flip side, there are thousands of collection agencies in the USA, giving employment to hundreds of thousands of individuals. They also help many businesses to avoid going out of business due to unpaid bills, saving their jobs as well.

Do read our article about how to improve the cash flow for your business and minimizing accounts receivables. While you outsource all those problems in debt collection to a 3rd party collection agency, you can focus on more important things like expanding your business or serving your existing clients.

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