Search Results for: the bureaus

Commercial debt collection or B2B collection involves two business entities, one of which owes money to another.

We can recover your outstanding invoices quickly, professionally, and without harming your business relationships. By using techniques like soft collections, skip tracing tools, credit bureau leverage, expert negotiation, legal network access, and third-party pressure, we tailor our recovery approach to fit your industry, debtor profile, and age of the debt—because effective collections are never one-size-fits-all. Majority of cases are resolved without the need for court involvement.

Our success rate in commercial collections is quite impressive. Most accounts that are less than one year old see an average recovery rate of approximately 80% on viable claims ( Less than 1 year old, and proper supporting documentation provided). 

The longer you wait, the more likely it is that the business may no longer have the ability to pay you. Working with an experienced B2B collection agency increases the chances of preserving a positive client relationship while helping you avoid the high costs of litigation and enforcing a judgment.

Our Commercial Debt Collection Methodology

• No Recovery – No Fee: If a commercial collection agency work on a contingency fee model, means if it does not recover money for you, they will not make any money either.
• Documentation and Primary Contacts: Apart from the core documentation, you may have emails or phone recordings in which the debtor could have acknowledged the debt. Tell your collection agency precisely who you think should be reached out to resolve this debt.
• Customized Strategy for Each case: An experienced commercial debt collector will analyze your case and develop a custom collection strategy. He will call your defaulter and get him talking. The collector may even email, fax,message or send certified mail to get your debtor’s attention. They explain all the consequences of not settling the debt.
• Initiation: Talk to client and identify the actual cause of non-payment and devise a plan for payment. The collector will decide the optimal time and contact for calls or emails, and will judiciously escalate pressure as needed. If a client blocks one number, call is made from a different number. A commercial collector employs various strategies to expedite debt recovery.
• An aggressive approach usually does not work: A well-planned diplomatic approach protects the business relationship,  your debtor is approached with dignity and respect. A well-calculated intensive approach can be used later to resolve debts if your debtor does not cooperate with us.
• Send Legal Notice: If all amicable collection efforts fail, a notice may be sent through an attorney (in-house lawyer or a partner law firm). This puts tremendous pressure on your debtor to settle the debt.
• Final chance to settle: Most cases are settled even before a case is filed in court. Legal action is pursued only after written authorization from you.
• Final Negotiation: If the debtor proposes a settlement offer lower than the original amount due, it is accepted only after your approval ( also known as Settle-in-Full authorization).
• Court Order and Enforcement: Once a favorable judgement is achieved, we take several actions to enforce it and get paid.  The collected amount (minus the contingency fees) is remitted into your bank account via ACH transfer or by mailing a check.
• Credit Reporting: Just like individuals, businesses also have credit scores. Commercial collection agencies can report debts to business credit bureaus ( ex: Moody’s Experian and Dun & Bradstreet). This can impact a business’s future ability to obtain loans and business prospects.
• Duration: Most cases are resolved within 40-45 days. However, some may last for a few months if a court order is required. The commercial debt collector may also negotiate a payment plan if required.

Ongoing Checks: Commercial collection agencies use advanced tools to track significant changes to your debtor’s business credit profile. Debt collectors can find business owners’ alternate addresses and telephone numbers using skip-tracing tools. A commercial collection agency may also find a recent summary of your debtor’s payment activity with other creditors to further strategize their collection efforts.

Good News – There are no federal “Statute of Limitations” for commercial debt. 

Commercial Collection Agency Fees:

Commercial collection agencies have a low-cost contingency fee model; No recovery means No fee is charged. The collection fee for each case is communicated in advance and primarily depends on three factors: Age of debt, Balance Due, and Complexity. The contingency fee is usually between 20% and 40% of the collected amount. Accounts with lower balances or those older than one year have a slightly higher contingency fee. Here is a rough estimate of what a typical commercial collection agency fees are:

Comparing Consumer (B2C)  vs Commercial (B2B) Collections

Consumer (B2C) collections focus on recovering debts from individual customers, often requiring a delicate, customer-centric approach. In contrast, Commercial (B2B) collections involve reclaiming debts from businesses, typically demanding a more formal, contract-based strategy.

When selecting a commercial collection agency, consider factors like their experience, success rate, tactics they use, whether they have proper licensing and accreditation, and reviews or references from other clients. All commercial agencies must follow the Uniform Commercial Code (UCC).

Legal and regulatory collection laws

Consumer debt collection is largely governed by federal laws, such as the Fair Debt Collection Practices Act (FDCPA), and some state regulations.

A commercial debt collection agency is entirely exempt from most of these laws because these laws aim to protect consumers than businesses.

As of April 15, 2022, CFPB Director Rohit Chopra hinted at the possibility of expanding FDCPA laws to commercial debt.

Relationships matter: Negotiate for better recovery.

Understanding your legal options thoroughly is crucial, but avoiding litigation is often the preferable course of action. Encouraging amicable discussions for settling debts can lead to more productive recovery outcomes, and may even preserve ongoing business relationships. If you find yourself dealing with a business customer who has overdue obligations, aim to steer clear of confrontational approaches. Instead, focus on collaborating to find a mutually beneficial solution to the problem.

Blurring the line between personal and commercial debt

A commercial collection agency has fewer restrictions; however, many commercial debts are backed by a personal guarantee. When the collections process moves to the enforcement stage, such as levying against bank accounts and other assets, you may be limited by the individual guarantor’s rights.

Commercial debt collection in a B2B (business-to-business) context involves the process of collecting overdue payments from one business by another business. This is typically initiated when a business has provided goods or services to another business, but has not been paid according to the terms of their agreement. Unlike B2C debt, each B2B debt is handled based on the case history and complexity of the case.

B2C collections involve the process of collecting debts from individual consumers (B2C stands for business-to-consumer). This usually occurs when a business tries to recover money owed by customers for goods or services rendered. This process is highly regulated to protect consumer rights. Not many collection agencies offer B2C collections due to lower margin and too many government restrictions.

Process of debt collection:

1. In-House Collection Efforts: Initially, the creditor business usually tries to collect the debt through its own internal efforts. This may include sending reminders, statements, and making phone calls to the debtor business to request payment.
2. Formal Demand Letter: If initial attempts do not result in payment, a more formal demand letter can be sent. This letter typically outlines the amount owed, the original terms of payment, and may give a final deadline by which the debtor must pay to avoid further action.
3. Negotiation and Payment Plans: Sometimes, the debtor business may be facing cash flow issues. In such cases, the creditor might be willing to negotiate payment terms or agree to a payment plan.
4. Engaging a Collection Agency: If internal efforts to collect the debt fail, the creditor business may engage a commercial collection agency. These agencies specialize in debt collection and will undertake efforts to collect the debt on behalf of the creditor, often for a fee or a percentage of the amount collected.
5. Legal Action: As a last resort, if the collection agency is unable to recover the debt, the creditor may choose to take legal action against the debtor. This is typically an expensive and time-consuming process, so it’s usually reserved for significant debts where the potential recovery justifies the costs.
6. Reporting to Credit Bureaus: The creditor or the collection agency may report the unpaid debt to business credit bureaus. This can affect the debtor’s business credit rating and make it more difficult for them to obtain financing in the future.
7. Asset Seizure and Liens: If a court judgment is obtained in favor of the creditor, the court may allow for the seizure of the debtor’s assets or place a lien on property to satisfy the debt.
8. International Collections: If the debtor business is based in a different country, international debt collection procedures may apply. These collections can be more complex due to differences in laws and regulations across countries.
9. Ethical and Legal Compliance: It is crucial that the creditor and any collection agency they engage comply with the laws and regulations governing debt collection, such as the Fair Debt Collection Practices Act (FDCPA) in the United States. While the FDCPA primarily applies to consumer collections, ethical practices should be maintained in B2B collections as well.
10. Documentation and Records: Keeping detailed records of all communications and actions taken in the debt collection process is critical. This documentation may be needed if the case goes to court.

Collecting a debt can be a delicate process especially for big businesses, and it’s important for businesses to handle it lot more professionally. The approach taken should balance the importance of maintaining a good business relationship with the need to recover the funds owed.

Collecting a debt can be a complicated process. Whether someone owes you money under a contract or you’ve obtained a court money judgment against someone, several tested tactics can get you paid. When it comes to collections, success requires an organized, well-managed, and thorough process. There are no secret tricks or little-known tips, although some ingenuity in obtaining information is helpful. Ultimately, collection success follows diligence and focus.

Here are ten of the most effective collections tactics and how to apply each to increase your collections cash flow:

1. Use all the information you already have on your debtor

If the debt is from a contract or a loan, you probably have an application or some other preliminary documentation on your debtor. Loan applications ask for extensive contact and employment information, and while some of that information is part of an approval process, it’s also used for collections. Start with the debtor’s address and employment information listed on the application or other documentation.

2. Search online and on social media

Chances are, your debtor has some digital footprint, and online information can be a source of contact information and other insight into the debtor’s affairs. Check social media accounts for the debtor, and then look for employment clues, or details on where the individual lives, works, and who they associate with.

3. Check those credit references

If you asked for credit references as part of a loan or rental application, this is the time to reach out to the listed people. In general, you can only ask these references for information about the debtor’s location and cannot discuss the debt details. Contacting references serves two purposes: it alerts the debtor (since the reference may contact them) and can be the source of new information on the debtor.

4. Contact, contact, contact

Once you have basic contact information from your documentation, online sources, or references, begin a scheduled and persistent process of contacting the debtor. Begin with a phone call and a letter. Use certified mail with the first mailing attempt, as this can confirm a debtor’s address and can be evidence that you alerted the debtor of the amount owed. Be persistent and firm, but tell the debtor you want to work with them to resolve the matter.

5. Uncover banking information

If you are collecting on a money judgment, you may be able to enforce the judgment using bank account garnishments, but the key to this tactic is knowing where your debtor keeps their money. You may have this information already from any payments the debtor may have previously made. Also, if you paid the debtor via a check, see which bank processed the payment. Go back and check social accounts, too. Your debtor may follow the social media feed of their financial institution.

6. Find out if the debtor owns a vehicle

Many state motor vehicle departments allow third parties to request information on vehicles registered to an individual. Like bank accounts, a car or other vehicle can potentially provide a source for payment.

7. Ask the debtor, and others, to provide information

If you have a judgment, you can invoke your standing as a judgment creditor to compel disclosure of information on the debtor. An information subpoena is a simple list of questions such as:

• Where do you bank?
• Do you have any cash on hand?
• Where do you work?

An information subpoena can also be sent to third parties, such as banks and certain individuals, to find answers to the same questions.

8. Offer a payment plan

It’s possible — likely, even — that a debtor hasn’t paid you because they cannot. Offering a payment plan may be a tactic to get some cash flowing and create a more friendly relationship that can result in more payments. A payment plan can also take the form of a Confession of Judgment, which can speed up the process of converting the collection account to a judgment if necessary.

9. Be open to settlement

When it comes to collecting a debt, getting some amount is preferable to getting nothing. Use the information that you have collected to assess whether or not the debtor has assets or means to pay the debt. Extend a discounted offer to accept a smaller sum in full, and reduce the amount of your losses.

10. Document Everything

Keep records of all communications and agreements made with the debtor. This includes phone calls, emails, and written correspondence.

11. Hire professionals

Professional debt collectors know how to orchestrate all that’s required for a successful collection. They often take a percentage of what they collect, so there’s little or no out-of-pocket expense. They know all these tactics and more and can help manage the process and guide you to more money. Debt collectors recover money from unpaid invoices all day long. That’s their job, their debt recovery tactics cannot be matched by regular folks. As a last resort, reporting the debt to credit bureaus can sometimes incentivize payment, as it affects the debtor’s credit rating. Make sure that you are compliant with laws and regulations when doing this.

Once you approach a Collection Agency, they will

• Have you signup a contract after explaining all their services.
• Setup your preferences such as Mode of Payment/remittance for the amount collected ( send you a check or direct deposit in your bank account).
• Do you want accounts to be reported to Credit Bureaus or not.
• After unsuccessful contacts, should they transfer unpaid accounts to their next service automatically or not.
• Finally provide you the email and phone number of Client Support if needed.

When an unpaid debt is assigned to a Collection Agency, they will run the following checks on each account assigned (regardless of the service selected):

a) Bankruptcy Scrub: To check if the debtor has been legally discharged of his debts by a court.

b) Address Scrub ( or Skip Tracking): To find out the latest address and the phone number of the debtor.

c) Statute of Limitations check: A debtor cannot be sued in court after certain number of years. This varies from 3 to 10 years depending on which state the debtor resides. Most agencies will not attempt collections on on these time barred debts.

d) Litigious debtor check: This check is done by very few agencies, wherein they check if a debtor has a history of filing lawsuits. They either do not attempt collections on these accounts, or suggest an alternative approach.

e) Debt dispute period: Debtor has about 30 days to dispute a debt after the first contact is made by the collection agency. If a debtor indeed disputes the debt, the client/creditor must provide the statement / invoice /signed contract which proves the validity of debt so that collection activity can proceed. One should not even think of assigning an account for collections if backup documentation is not available.

Next, depending they type is service enrolled, different things can happen.

1. Collection Letters Service (Fixed Fees Service)

A creditor typically purchases accounts (for roughly $15 per account) from the collection agency. There is no other collection fees charged from the client beyond this flat-fees. Debtor pays the client/creditor directly. A collection agency will send up to 5 demand letters and verbiage of these letters start from “diplomatic/amicable” to slightly intensive with every passing letter. Verbiage can also vary depending on the industry of client (small business debt, medical debt, dental debt, bank debt or insurance debt). Client must notify the Collection Agency if a payment is received so that further demand letters are stopped.

2. Collection Calls Service (Contingency Fees)

Collection agency will typically do an “advanced” skip tracing to locate the debtor more accurately. Whatever is collected, a Collection agency keeps a percentage ( typically 35%-45%) of the money recovered. No recovery means no fees. Debt collectors will try to collect 100% of the amount due in full in “one-go” or by putting debtor in an “installment plan”. They may also report the unpaid debt to Credit Bureaus if collection efforts fail. They will call the debtor multiple times in accordance to the FDCPA debt collection laws. Good debt collectors are able to handle debtor excuses very well and know how to talk around those excuses. They are expert at the art of collecting debt, after all that is what the collectors do all day long.

3. Legal Collections ( Contingency Fees)

Typically, no more than 5% of all accounts assigned ever make it to the legal collections. A collection agency will inform  the client/creditor before transferring this account for legal collections or make this a part of your contractual agreement. They may attempt to garnish debtor’s wages, attach assets or put lien on the debtor’s house while attempting to get a favorable judgment. Collection agency may even try to add the lawyer fees on top of the amount owed, but it is up to the judge to accept it or not.

Hope this gives you a fairly good idea on how a Collection Agency works.

If you are looking for a cost-effective collection agency Contact us and we will connect you to a good one based on your requirements and industry.

Banks and credit unions make their money by lending, so delinquencies are inevitable even in the best economic environments. The figures vary, but as of 2023, the national delinquency rate for consumer loans is about 2.23 percent.

Debt collection is necessary for banks and credit unions to recover loans and credits extended to borrowers who have defaulted or failed to adhere to the repayment terms. However, it’s important to note that debt collection should be carried out in an ethical manner, respecting the rights of borrowers and following the regulations set by relevant authorities. Here are some of the commonly used debt collection tactics by banks:

1. Initial Contact and Notification: The bank usually sends a notice to the borrower informing them of the default and the need to clear the outstanding debt.
2. Payment Reminders: Banks may send regular reminders via email, text, or calls. These reminders are usually polite and serve as a nudge for the borrower to fulfill their obligations.
3. Repayment Plan Negotiation: Banks often work with the borrower to come up with a revised repayment plan that is more manageable for the borrower’s financial situation.
4. In-House Collections: Before taking any legal action or outsourcing the collection process, many banks use their in-house collections department to attempt to collect the debt.
5. Credit Reporting: Banks may report the defaulted loan to credit bureaus, which could affect the borrower’s credit score. This is often a big incentive for the borrower to settle the debt.
6. Use of Collection Agencies: If internal efforts don’t succeed, the bank may hire a third-party collection agency to pursue the debt. These agencies specialize in debt collection and usually work on a commission basis.
7. Legal Action: As a last resort, the bank may initiate legal proceedings against the borrower to recover the debt. This can lead to a judgment and potentially wage garnishment or property liens.
8. Debt Settlement Offers: Sometimes banks might offer to settle the debt for a lesser amount than what is owed, especially if they believe that the borrower may not be able to pay the full amount.
9. Charge-Offs: If collection efforts have not succeeded within a certain period, the bank may write the debt off as a loss. This doesn’t relieve the borrower of the obligation to pay, but it means the bank has given up on collecting the debt as an asset.
10. Repossession: If the debt is secured, such as in the case of a car loan, the bank may repossess the collateral (such as the car) if the borrower defaults.
11. Communicating Through Authorized Channels: Banks should respect the borrowers’ preferences and legal requirements regarding communication channels (phone, email, etc.), time of contact, and language.

It’s important for banks to follow the rules and regulations set by governing bodies, such as the Fair Debt Collection Practices Act (FDCPA) in the United States, which outlines the legal and ethical boundaries in debt collection.

Collecting a debt is a complex process that interweaves law and strategy. Debt recovery is a vital part of all financial institutions as unpaid invoices can hinder business success.  Financial institutions must create strategies to manage a regular collections caseload.

Without a communication strategy, collection is impossible.

Many reasons can cause a customer to miss a payment. Part of the challenge is getting to know your customers’ financial struggles without bogging down your collection process. Communication is the best way to maintain a positive relationship with a customer that can weather financial struggles and lead to successful collection. There is an adage in collections that if you don’t call, you won’t collect; this holds true, especially for lenders and other financial institutions.

Strive to communicate frequently and proactively with customers. Encourage them to answer your calls and letters by adopting a collaborative tone. Be a resource for your delinquent borrowers by offering solutions. It’s a challenge, as debtors can easily enter a mindset of burying their heads in the sand. Show them a light at the end of the tunnel, and they may be more likely to work with you. Even if your communication efforts fall flat, at least you have maintained contact and can leverage the information you obtain from your calls to power more advanced collection efforts.

Use a pooled approach for maximum efficiency.

While it is crucial to maintain a positive relationship with your debtors, this nurtured relationship cannot be at the expense of efficient collections. Pooling collection resources is ideal because it reinforces consistency and leverages tools like a dialing system. The traditional method of financial institution collections involves assigning a dedicated agent. This traditional process has many benefits in nurturing a close relationship, but the efficiencies of a pooled approach offset these benefits. A pooled approach also forces a financial institution to operationalize a collection strategy — to make it uniform and regular.

Beyond uniformity and the ability to use a dialer, a pooled approach also has the advantage of data analytics. With all your collections resources aimed at a common goal and working on a common group of collection accounts.

Use collection tools and know the law

Creditors have numerous tools at their disposal for collections depending on the stage of the collection process. The overall goals are to obtain an agreement to pay the amounts due, or a portion, and fulfillment of the agreement. Collection tools that help reach these goals include the communication strategies we discussed but can also involve something unique to financial institutions — the right of offset.

Offset is when a financial institution can tap into deposits of a borrower to satisfy a debt. This practice has federal and state limitations, and financial institutions should become fluent in the applicable rules and regulations. For example, the Federal Reserve Board’s Regulation Z prohibits banks from using the right of offset for credit card debts. California state law stops a financial institution from depleting a debtor’s bank account to below $1,000. Other state laws protect certain deposited funds, such as disability, social security, or unemployment income.

Another tool is the use of credit reporting. Accurate credit reporting incentivizes payment and can be a tool to work with a delinquent borrower. For example, a financial institution should clearly communicate the ramifications of nonpayment and of entering a repayment agreement.

Engage the help of a collection agency for maximum results.

Banks, credit unions, and other financial institutions are in the business of investing and lending money. While collections is a component of banking operations, they can also distract and bog down operations. By hiring a collection agency, banks can more efficiently operationalize collections, reaping the benefits of the tips we discussed and more. Professional collectors can execute an organized and well-managed communication strategy, pool resources for efficiency and effectiveness, and know tools and legal strategies to maximize recovery.

Credit card debt is the largest category of collections for banks, but the other two major ones would be auto and home loans. Home loan collections are often handled by servicing companies – but also for all types of bank collections, there are at least 2 stages – collecting on a past due balance, then collecting on judgments and enforcing lines for secured debt. The four largest banks in the USA have 4 billion in credit card charge-offs – a huge number.

Contact us today for more information on how a professional collection agency can help your financial institution lower delinquency rates and increase collection revenue.