There are about 5000 collection agencies in USA, selecting a good collection agency can be a daunting task, when each agency claims itself to be the best.
We will try to simplify the process for you here. I have personally been in the collections industry for the last 18 years. This analysis is based out my very own personal experience and opinion.
1. Debt Collection Agency Size:
❌ SMALL AGENCY: A collection agency with less than 20 employees will surely be hungry for growth but will lack licencing in all states. It will also lag behind in technology, data security and providing performance reports. They may not necessarily have debt collectors who have experience in your particular industry and likely operate in only one time zone.
❌ VERY LARGE AGENCY: A large 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 nationwide collection license, but unless you are client who submits over than 2000-5000 accounts a year, you will likely feel lack of personal attention. Due to the large volume they deal with, their collection rates 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: Collection agency with headcount between 30 and 200 will likely have pan USA license. They will have a client portal, performance reporting, security and adequate data standards. The owner of collection agency will micro-manage performance and client satisfaction. Medium sized collection agencies almost always exceed recovery rates when compared to very large collection agencies.
2. Technology and Security:
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 a SSL certificate (Secure Sockets Layer certificate), which ensures that the communications are encrypted and cannot be stolen by a hacker.
3. Location: 100% USA based.
Preference should be given to a collection agency who has all their staff located in USA and not in countries like Philippines, Mexico, India or China. This includes support staff, software development staff and call centers. Google around, and you will come across numerous news articles about critical personal data been stolen/sold by dishonest employees in foreign countries. Information being handled by USA citizens / residents are covered under strict USA laws and punishable in USA courts. I feel once the data leaves USA shores, you can never be in 100% control of it.
4. Performance / Collection rates:
Although recovery rates vary across industries, regions and the quality of debt, but it is always good to ask if their recovery rates meet the industry average. Some may just 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 agency makes more money when accounts are submitted under the 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, the fact is for accounts with 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. 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 2 years. This is a great money saver as one does not land up losing money to a collection agency (in form of unused accounts), who were instead hired to recover money, not for losing money.
7. Are the letters printed in Black/White or Colored print:
Collection agencies who print demand letters in colored prints land up getting far superior recovery rates. So paying slightly more for colored prints 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 guarantee to recover minimum twice the money which is invested with then under the collection letters service. Although it comes with a fine-print, but 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 in 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 Telephone Consumer Protection Act (TCPA). They are also supposed to be licensed and insured. Google a bit, if a collection agency is in the news for repeated violations then avoid them.
11. Contractual Agreement Verbiage:
Before signing up 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 there is something which bothers you, contact another collection agency and read their agreement as well and may be you like this one better.
12. Collection Cost:
Always select a collection agency which has better recovery rates, not for the cheapest one. If an agency invests more in their resources, quality of letters and an All-American staff, they may be 10% more expensive than 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 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 5 collection letters per account submitted, some collection agencies cut corners by sending only 3 or 4 collection letters.
13. Credit Reporting
Do they offer to report unpaid accounts to credit reporting agencies like Equifax, Transunion and Experian.
14. Debtor Scrubs:
Are the Scrubs are performed on all accounts submitted: Litigious Debtor, Bankruptcy and USPS Change of Address. Not all agencies offer the Litigious Debtor scrub, and it is extremely important one to protect you from potential lawsuits.
15. Bilingual Collectors:
Can they do debt collection in both English and Spanish. A person who does not understand English that well, you will need Spanish speaking debt collectors for him.
16. Legal Collections Service:
Accounts which complete the Collection Calls service ,can they be further transferred for Legal Collections. Ask if the collection agency has a national network of lawyers or not.
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 collection agencies, most negative reviews are left by debtors. Getting 5 star reviews by paying someone is not hard. I personally suggest, avoid those. BBB reviews are still more reliable.
You can contact us for your debt collection needs.
We will connect you to a good one based on your requirements at no cost to you.