Businesses and medical practices can make a more informed decision when working with collection agencies to protect their financial interests and reputation.
Cherry-Picking Accounts
Many agencies prioritize easier-to-collect debts, neglecting more challenging ones like older debts or those with low balances. They might also focus more on high-value accounts, ones with better credit rating and commercial debts over consumer debts. This selective approach can reduce overall recovery.
Solution: Choose an agency that provides detailed action reports for each debtor, including call and demand letter histories. If online data is limited due to privacy concerns, the agency should offer a summary upon request.
Outsourcing to Other Agencies
Since most agencies aren’t licensed in all 50 states, they may outsource collections when debtors move to states where they lack a license. Clients are often not informed about these third-party handovers.
Solution: Opt for a collection agency with a national license to avoid complications from outsourcing.
Why Their Collection Fee is So Low
Lower fees often mean lower effort. Agencies charging lower contingency fees may cut corners on services or hire inferior quality debt collectors, resulting in poorer collection outcomes and inadequate data security. The risk of debtor data breaches is higher with such agencies.
Analogy: Think of a low-cost agency as a car without airbags, wipers, or seatbelts—it might move, but it lacks essential safety features. A higher-fee agency will provide better recovery rates and data security.
Impact on Client Reputation
Aggressive collection tactics can damage a client’s reputation. Surprisingly, agencies that use respectful, diplomatic methods often achieve better results than those using harsh approaches.
Solution: Review Google ratings for the agency, selecting only those with a rating above 4.5 stars and at least 1,000 reviews.
Fees and Hidden Costs
Collection agencies might not be transparent about all fees, including hidden charges, which can reduce the net amount recovered for the client.
Solution: Ensure clear communication and documentation of all fees before engaging a collection agency
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