There are about 5000 collection agencies in USA, and selecting a good collection agency can be a daunting task when each agency claims itself to be the best.
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How to Select a Good Collection Agency?
We will try to simplify the process for you here. We have personally been in the collections industry for the last 20 years. This analysis is based on our very own personal experiences and opinion.
1. Debt Collection Agency Size:
❌ SMALL AGENCY: A collection agency with less than 20 employees will surely be hungry for growth but lack licensing in all states. It will also lag in technology, data security, and providing you performance reports. They may not necessarily have debt collectors with experience in your particular industry and likely operate in only a one-time zone.
❌ VERY LARGE AGENCY: A large third-party collection agency (with over 500 employees) will certainly have more headcount and branches but will lack personal attention. They will surely be rich in technology and have a nationwide collection license, but unless you are a client who submits over 2000-5000 accounts a year, you will likely feel a lack of personal attention. Due to the large volume they deal with, their collection rates are just average. Upper management will likely focus on generating higher profits for themself and getting new clients instead of focusing largely on recovery rates and client retention.
✅ MEDIUM-SIZED AGENCY: A collection agency with a headcount between 30 and 200 will likely have a pan-USA license. They will have a client portal, performance reporting, security, and adequate data standards. The owner of the collection agency will micro-manage performance and client satisfaction. Medium-sized collection agencies almost always exceed recovery rates compared to large collection agencies.
2. Technology and Security:
A third-party collection agency should have high-security standards like the “PCI or SOC 1 or SOC 2” compliance and certificates to prove it. They should have a “Client Portal” on which you can submit new accounts, stop service, and report payments. “Client Portal” should be secured with an SSL Certificate (Secure Sockets Layer certificate), ensuring that the communications are encrypted and cannot be stolen by hackers.
3. Location: 100% USA based.
Preference should be given to a collection agency that has all their staff located in USA and not in countries like the Philippines, Mexico, India or China. This includes support staff, software development staff, and call centers. Google around, and you will find numerous news articles about critical personal data stolen/sold by dishonest employees in foreign countries. Information being handled by USA citizens/residents is covered under strict USA laws and punishable in USA courts. We feel that once the data leaves USA shores, you can never be in 100% control of it. What if a foreign employee sells personal data to the bad guys?
4. Performance / Collection rates:
Although recovery rates vary across industries, regions and the quality of debt, it is always good to ask if their recovery rates meet the industry average. Some may say “YES or ABSOLUTELY”. But getting a response back that their recovery rates “EXCEED” the industry average is quite self-assuring.
5. Sales Experience and Explanation of products:
Collection agencies make more money when accounts are submitted in contingency services ( Collection Calls or Legal Suit).
Do not simply fall for the “No Recovery -No Fees” slogan.
In contingency services, they get to keep 40% to 50% of the total amount recovered. But, for accounts with an age of debt between 60 and 120 days, it is better to use the fixed fees “Collection Letters” service, as it is a low-cost option and still delivers stellar recovery rates. Only those accounts which remain unpaid after this step should be transferred to the Contingency collections.
6. Validity Length of Accounts Purchased:
Most collection agencies expire accounts purchased under the Collection Letters service in 1 or 2 years. Only a handful of agencies out there have no expiration dates on these. It means accounts purchased can be used even beyond two years. This is a great money saver as one does not end up losing money to a collection agency (unused accounts). The agency was hired to recover your money, not to lose more money.
7. Are the letters printed in Black/White or Colored print:
Collection agencies that print demand letters in colored prints get far superior recovery rates. So paying slightly more for colored print results is highly recommended as they tend to grab better attention of the debtors ( read it as “greater worry” for debtors).
8. Debt Collection Guarantee:
Many agencies offer a guarantee to recover at least twice the money invested under the collection letters service. Although it comes with fine print, it is certainly a great assurance.
9. Quality of Customer Support:
Do they have a toll-free number, and do their operational hours suit you? Give it a try, call the Customer Support number anyway even before you hire them, and see for yourself how long does it take to get through a real person. If you did not get a real person on the first try, try once more after some time.
10. Adherence to laws:
Collection agencies are supposed to follow many laws like Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), and the Telephone Consumer Protection Act (TCPA). They are also supposed to be licensed and insured. If a collection agency is in the news for repeated violations, avoid them.
11. Contractual Agreement Verbiage:
Before signing up for those important contractual agreement pages, take an hour and carefully read the agreement. Make sure that it contains nothing that is not agreeable to you. If something bothers you, contact another third-party collection agency and read their agreement, and maybe you like this one better.
12. Collection Cost:
Always select a third-party collection agency with better recovery rates, not the cheapest one. If an agency invests more in its resources, quality of letters, and All-American staff, it may be 10% more expensive than its peers, and there is nothing wrong with that.
Paying a few hundred more now will likely result in thousands more later in your pocket. Do not go for the cheapest agency, but the better one. Ask the sales agent why their service is slightly more expensive than other agencies, I am sure you will like/appreciate his answer, and do not be surprised if he offers to match the discounted rates.
Do they send five collection letters per account submitted? Some collection agencies cut corners by sending only 3 or 4 collection letters.
13. Credit History Reporting
Do they offer to report unpaid accounts to credit reporting agencies like Equifax, Transunion, and Experian?
14. Debtor Scrubs:
Data scrubs are performed on all accounts submitted: Litigious Debtor, Bankruptcy and USPS Change of Address. Not all agencies offer the Litigious Debtor scrub, and protecting you from potential lawsuits is extremely important.
15. Bilingual Collectors:
Can they do debt collection in both English and Spanish? You will need Spanish-speaking debt collectors for debtors who do not understand English that well.
16. Legal Collections Service:
Accounts that complete the Collection Calls service can be further transferred for Legal Collections. Ask whether the third-party collection agency has a national network of lawyers.
17. Medical Collections:
Ensure that the collection agency follows HIPAA privacy guidelines.
Things that do NOT matter much:
1. A Collection agency located near you. Most agencies can handle accounts nationwide and have contracts with local lawyers if needed at no extra cost.
2. Yelp/ Google reviews. No one likes debtors leaving third-party collection agencies’ most negative reviews. Getting 5-star reviews by paying someone is not hard. I suggest avoiding those. BBB reviews are still more reliable.
You can contact us for your debt collection needs. We will connect you to a good third-party collection agency based on your requirements at no cost.
