With increasing defaults on debt due to a number of reasons, recovery or collection agencies are also specializing in handling various types of debt defaults depending on the nature of industry. The magnitude of the problem can be gauged from the fact that in 1997 alone the total amount recovered by collection agencies in U.S. amounted to a huge $32 billions as per American Collector Association figures. This article discusses some of the specializations in the debt recovery industry.
Medical or health care collection agencies partner with health care providers like hospitals and doctors’ clinics to recover legal debt that may be owed by companies or individuals availing health care. The recovery procedure should be strictly in accordance with the provisions of law. This partnership allows the health care providers to focus on their job instead of pursuing defaults in payments.
Consumer recovery agencies provide services to retail operators like health clubs, telephone and other service providers. The debt owed may be club fees, telephone bills etc.
Commercial recovery agencies are those who serve banks and other institutions in the financial sector. Bad debts like credit card default, overdue loans on automobiles, pending mortgage payments etc. are some of the cases handled by these agencies. They usually buy the bad debts at a discounted rate from the institutions that gave the loan and then proceed to recover the debt.
Agencies that handle bad checks usually pay a sum upfront to the creditor as a percentage of the check amount. It may not be possible for an entity like say a consumer durables store to pursue each and every case of bouncing of checks. Hence they may prefer to hand over the case to a recovery agency that has the necessary resources to pursue it and recover the dues.
There are also specialty collection agencies that collect for different industries such as: libraries, utilities, etc… These speciality debt collectors have very specific knowledge in these certain industries. This can be helpful if you industry is highly regulated or has multiple payer sources.
Once a bad debt account has been handed over to a recovery agency and the agency agrees to pay cash to the creditor as a percentage of the debt to be recovered, the liability of the debt gets passed on to the agency. This enables the creditor to show a healthier balance sheet. The creditor would not mind paying an upfront fee as recovering a bad debt would involve time and money even if done in house.
Many companies are concerned about money owed to them by individuals or other organizations so it is very important for them to employ the professional help from collection agencies. Collection agencies are the ones who are well equipped and more knowledgeable when it comes to figuring out which methods to use to effectively collect debt from the debtors.
Businesses and companies should just concentrate on their operations and other ways to boost their revenue and leave the collections to the debt collection agencies instead to allow for 100% success rate on collections. It is important for a business to realize that bad debts can affect the accounting books in a great way and can decrease the likelihood that a business will succeed, especially if the debts are so enormous that it does not balance out to the gains of the company. A debt collection firm can step in and help sort everything out and make sure that all the backlogs and losses are mitigated.
Debt collection agencies have the right amount of manpower that has been trained especially for debt recovery. This is a type of skill that is so highly specialized because of the complexity of gathering money that was owed. Debt collection agencies have invested their money and time in the art of persuasion and conversation to give opportunities for the debtors to negotiate and eventually settle their debts. Debt collectors have studied consumer behavior, most specifically those of the debtors and they have mastered all the moves that debtors do to evade paying. It is the debt collection agency’s job to go around these obstacles to make sure that debts are paid.
One of the best things that a debt collection agency can do is send a debt collection agency representative. By doing so, they are able to establish a more serious tone of debt collection more than how letters or phone calls can. A lot of debtors feel that when they encounter a debt collector face to face, the debt collection is much more serious and more urgent than ever before. A collection agency understands perfectly that phone calls and letters, and other impersonal methods of collection can be ignored by other people and not be taken seriously.
Debt collection agencies also have the right connections with private investigators and other authorities who may be of big help in trying to recover debt. Private investigators may be employed in order to look into the personal information of the debtors that may help in legal action or further negotiations that may push for them to pay their debts. Asset investigation representatives are also ready to take on the job of researching about the properties, bank accounts and other pertinent information that will show the capability of a debtor to pay the overdue amount. These are the methods that debt collection agencies are capable of in order to help out companies and businesses recover money that is rightfully theirs to start with. By doing these, debts can be settled effectively.
It can be extremely frustrating for a certain creditor when their lenders fail or decline to pay debts owed to them. If you have done everything and still nothing happens, the last resort sometimes is by hiring the services of collection agency that will the deal debt recovery. However, some creditors want to get their money but they don’t want their debtors to feel harassed. They have all the means and techniques on how they can recover the money without being intimidating. Read on to know the best and effective collection agency.
Most of the times, individuals fail to pay their obligations on time for the reason that they don’t have enough amount of money to use for payment. These individuals are required to make agreement to settle their debt. However, if the creditor still wanted to work with them and they don’t want their customer to feel threatened or overwhelmed, choosing the best collection agency that will be an agency that will help you get the debt.
As an example, remember that there are some rules the forbid the collection agency from contacting the person on intolerable hour of the day or night. The only time allowed for a credit agent to call the debtor is during office hours from 8 in the morning until 9 in the evening. By this the person can receive calls on a normal basis without impending their time to sleep. This is one of the issues that most debtors hate about collection agencies, so even if they owe a debt to the creditor, an effective collection agency must stay professional all the time.
Clearly, it is not right for a certain collection agency to harass or threaten someone. This comprises any vulgarity, verbal abuse, physical abuse or threats. It is also forbidden to threaten someone by threatening that their debt will be exposed publicly in case they could not pay or threaten them in any other way.
It is also included in the law that bans a certain collection agency from contacting a third party as reference to the person’s debt without consent. In case there’s a situation wherein there’s no available contact information, a friend, previous neighbor or family can be contacted to locate the person. On the other hand, collection agent should not disclose the reason why they need to contact the person.
In some situation, a debt agency has also another means on that is to take legal action against the debtor who doesn’t want to pay debts after various actions have taken. Furthermore, they should file lawsuit in the state wherein the debtor lives because they will not be given the chance to go out of the state to appear for the hearings. On the other hand, there can be exclusion, it is for someone who opened account in other state and transferred to another.
Finally, when you want to contact a collection agency make sure to review their track record and reputation. If you have the best collection agency, you will surely collect the money that the debtor owes.
Nowadays, there are lots of businesses that are outsourcing collection agencies to collect unpaid debts from their clients. Although it is quite expensive to hire debt collector but it can also help in boosting the cash flow of the business. The good thing about hiring collection agencies is that you need not worry in collecting outstanding debts from your clients because they will be the one to do the job. If you want to boost the business cash flow you should not only depend on internal bookkeeping. Instead, you should invest on outsourcing.
Collections agencies do the job of third party collections. As a business owner you should not hesitate on hiring them because they can help in improving the cash flow once all the debts are collected. As you will notice there are clients who have outstanding debts that forget their financial obligations despite of giving them reminder notices. Keep in mind that it is important to collect unpaid debts as it can be used in sustaining the business further. That is why if you are facing difficulty in collecting those debts the best thing to do is hire collection agency.
Hiring collections agencies can help you get your money back because it has psychological impact to the customers. Customers will react differently if debt collector has contacted them. It is because the presence of any of the collections agencies will greatly affect their credit rating. That is why in order to avoid the consequences brought by the collection agencies customers will be prompted to pay their obligations to your business to prevent worsening the problems.
Moreover, in hiring collections agencies you can have the chance to recover the debt of the customers that are difficult to track down. It is because the agency is using methods on how they can find non-paying customers and make them pay their debts in your business. Likewise, collection agencies are knowledgeable on how they will deal with customers and make them understand about their unpaid debts.
In the same manner, the collection agencies will be the one responsible in talking to your customers for some financial problems. Obviously, as a business owner you do not have enough time talking with your customers. Fortunately, collection agencies can find solutions on the financial problems of the customers yet gives assurance of collecting the unpaid debts. Through simple negotiations between the customers and the collection agencies, your business can receive smaller amount of payments from the outstanding bills in a regular basis.
Furthermore, the collection agency can use debt recovery tactics especially for those customers that are delinquent. They can use tactics such as arbitration, law suits, mediation and other legal actions. Thus, through the help of the collections agencies your business can run profitably again once all the outstanding debts are collected. Another advantage of hiring collection agency is that you can focus on other major activities of your business instead of worrying about the past due debts. Therefore, if you want to collect unpaid debts and improve the business cash flow all you have to do is hire collections agencies.
Business loans or debts always wish to ride high on accounts. By the same token, this notion is not always smooth and time starts to take its tolls on any business roadmap. The choice of a viable collection agency is of utmost importance here. Any non-paying account or bad checks need to be taken care of quality services of a collection agent so that precious business time is saved.
Role of third party collection services is directly in sync with any business. No matters one runs an individual business or is part of a big firm, the problem of bad checks, courtesy bad debtors, always loom large on the horizon. Significance of any commercial aspect of business is afraid of unpaid debt. A justified part of this mess is the involvement of collection agencies. Even from the debtors point of view, these services are a good chance to boost the credit rating score. Retrieval of unpaid debts in order to get the outstanding is the prime work of these agencies. Moreover, the trust factor is also there as these service agencies are licensed by the federal laws, coming to the fore as quality & trust-worthy middlemen. The Fair Debt Collection Practices Act is the umbrella under these bodies offers their services in different domain like bad check collection, retail or commercial collections for that matter. It is also advisable to check the expertise before contacting any national collection agency. It is also worthwhile of the trend of availing loans for different needs like bonds, mortgages etc which have paved way for these third-party collection agencies for collections services.Moreover, there some rules & regulations of practices of recovery collection agency for those accounts which are behind on payments. Some prime services which come handy in any good collection agent are mentioned as under-
Follow the nonpayer.
Approach the concerned party by calls, mails or letter
Maintenance of every correspondence (calls or mails)
Account maintenance of the debtor.
Legal assistance with attorneys.
As mentioned, any business firm that assigns the debt collection work to some third-party collection service, so that personal involvement is saved to focus on other aspects of business, it is always fruitful to have a look what the strength of the debt collector is. Some chief riders to choose some good agent are to have a look at past records of collections, behaviors with the borrower, etc. To outsource all the late payments issues are good from any time-saving point of view .Additional services could be any like legal advisors to take care of legal affairs of the firm, quick response to debt recovery needs etc. At the end of the day, reputation of customers also walk in tandem with the creditors hold over.
In current market scenario, incidences where customers are not repaying their debts or are abruptly delaying it for a considerable period of time, has become quite common. These unpaid dues have turned into a kind of regular and unavoidable issue for almost every large, medium and small organization. This kind of issues, where the bad debt obstructs the flow of capital, of these organizations, heavily damages their future growth prospects.
Although, such issues are really very grievous in nature. But, there are many Debt Recovery Companies and Collection Agencies who offer solution from such kind of problems. These organizations play a pivotal role, in settling the differences. They act like a kind of mediator between the creditors and debtors and try to settle the arisen differences between both of them. This way they play a very vital role by acting like a solution provider at both the end.
These organizations offer their services to those parties, who have given credit, by ensuring that their complete debt will be collected with in a very short period of time. However, for delivering such solutions, these organizations also offer their advise to the debtors and help them arrange finance or make them manage their burgeoning bill, but in a very disciplined and organized way.
There are many significant aspects of these organizations, which has made them very much popular and preferred option for every organization. However, they are a must for those who want to collect their unpaid dues from their customers. The most important benefit of availing the services of these agencies is that they save a considerable amount of time and resources, which otherwise would have spent behind the delinquent customers. This way the saved valuable time and resources are utilized on more important things which are very necessary to intensify the growth of the organization.
Debt Collection Solutions offering organization never just only assist the debtors manage their bill. There are many cases where these organizations have even purchased the complete debt, on behalf of debtors, from the creditor. This way they provide solution to the creditors and also buy time for the debtors to settle their debts.
Collection agencies are experienced in matters concerning debt collection. Debts do not necessarily emanate from lending of money. Some people make purchases and fail to pay up. Other people get services and when it comes time to paying for the money owing for those services, they are nowhere to be found. Therefore, those who wanted the debts to be paid back have tried to get their money back to no avail and that is why they end up hiring these agencies. Before they get to that point of paying for these services, they will try everything they can to get their money back. When nothing seems to work and desperation kicks in, services of the agencies can be solicited.
The first step these agencies will use to collect the debt is by drafting letters. These are not just any kind of letters. Since they are for an official purpose the format will be official. They will be addressed to the person or organization that is in debt. Letter will be jotted on behalf of the client who hired the services of the agency. Contents of the letter will include the reason why it is being written, the exact amount of the money owed, and a polite but firm request for the payment of the debt.
If the letters do not work, then the agency will look for another way to approach the matter. The letter is written to introduce the problem and the addressed person is given ample time to respond to its demands. A second and third letter will be sent and if there is still no response, then representatives of the agency will be sent to directly confront the person or organization. Unlike popular belief, the confrontation will not be violent. It will be a civil discussion between two parties until an agreement is reached.
Those who do not respond to the confrontation will now force the agency to use harsher means. Debts always ruin credit scores and bad credit scores can cause the person to find difficulty getting mortgage loans or even qualifying for loans. Therefore, what collection agencies do at this point is inform the credit bureaus of the impending debt. Proof of the debt will be needed and an investigation will be carried out and then that person will get red flagged. The only way to improve a credit score is by paying up the debt.
When worse come to worse, the collection agencies will involve a lawyer. This is usually as a last resort after others measures have been tried. They never threaten or intimidate the other party because if they did this then it would not look good in court. A judge will look at all the evidence and will want to know if measures were put across to get the other party to pay up before being taken to court. Since letters and credit bureaus have documentation that recorded the confrontation, the judge will rule in favor of the agency’s client and the debt will eventually be paid.
Among the main problems that most people and businesses have today is that of collecting the sales that they have made through credit and terms. While such a practice was meant to boost sales and revenue, debt collection becomes the main problem of concern once the allotted allowance for settlement has arrived. Most companies suffer from bad debts from their receivables and such is a risk once a business establishment approves sales on credit.
Due to these unfortunate events, people would emphasize largely on trying to collect the said receivables even if they would lapse the given grace period for settlement of dues. However in some instances, the supposed client are really incapable of settling their account and thus leaves a company to resort to either seeking legal assistance or for some, recorded as bad debts which add to losses that would be incurred by a company. The latter is of course the extreme recourse once all means for collection has been exhausted, including that of referring such matters towards debt collection agencies.
Resorting to Pro Debt Collection Assistance
Probably the last of the alternatives that a company would have is that of seeking assistance from pro debt collection agencies to help offset the governing debt issues that any entity would find itself in. While this resolution would still garner significant losses for the company, the amount of loss that will evidently be incurred is lower than that of getting nothing at all in return. Certain percentage rates and commissions are among the overriding charges to be incurred since such fees serve as payments for availing of the service.
Comparing the expenses to be incurred in such a scenario would be compared to that of a company leaving the burden towards the hands of hired people in the finance or collections department. However, pro collection agencies are more adept to such scenarios, being aware of such problems and knowing the proper procedures to undertake. This also includes as far as handling the entire scenario in a legal aspect to which demand payment will suffice for erring people who refuse to settle their financial obligations with the organization that hired them.
Assessing the Rate of Expected Debt Collection
For sure, the need to declare bad debts will be dramatically trimmed down. While there is no guarantee that such efforts would be able to remit all the outstanding obligations of endorsed past due accounts, getting a certain percentage over getting nothing at all is better for companies who want to manage their debt deficiencies.
The only factor that a company would put under consideration is the expenses to be incurred for the service. There are a lot of pro collection agencies known today and each would have different costs, depending on their level of expertise and track record. Either way, collecting the impending bad debts of an organization is the main point of concern. Maximizing all efforts to be able to get what is due is the main concern of anyone and large scale organizations are no exceptions.
Dealing with a debt collection agency is rarely easy and it is certainly never fun. If you ever find yourself communicating with a debt collection agency, knowing how to handle it will help make your life easier. Working with a collection agency does not always have to be stressful or time consuming.
1. How to Pay a Collection Agency
Document all of your monthly expenses prior to speaking to the collection agency. You do not want to be pressured into agreeing to a repayment plan that you will not be able to maintain. Knowing your expenses before getting on the phone will help you avoid making promises that you cannot realistically keep.
Get a notebook to be used only when communicating with the collection agency. Start using this immediately and always be sure to document the dates and times you talk to the collection agency along with the name of the agent helping you. Also, be sure to write down any arrangements that are made so that you can reference them quickly in the future.
Find out if there is a settlement plan available for you. Some collection companies are willing to reduce the total amount owed if you are able to pay one lump sum or make two or three large payments. If it is at all financially possible try to take advantage of these settlement programs.
Insist on making all payments through the mail using personal checks. Some debt collection agencies will try to insist that you pay using Western Union, MoneyGram, or other bill payment methods that will cost you money. Other collection agencies will encourage you to sign up for automatic payments which could leave you owing overdraft fees if you miscalculate your finances.
Mailing your payments monthly will help you avoid additional fees and using personal checks will help you build a record of your payment history. If you do not have a checking account consider asking a close relative (parent or sibling) to write and mail checks on your behalf.
Keep copies of all letters, checks, and documents concerning your collection account filed away in a safe place. Having documents verifying your payment history and debt amount will help you keep track of what you have paid and what you still owe. These documents will also help you if, in the future, your debt is sold to another debt collection agency or if you need to dispute information on your credit report.
The FDCPA broadly defines a debt collector as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” While the FDCPA generally applies only to third party debt collectors—not internal collectors for an “original creditor” — some states, such as California, have similar state consumer protection laws which mirror the FDCPA, and regulate original creditors. In addition, some federal courts have ruled that a collector of debt is not a “creditor” but is rather a “debt collector” under the FDCPA where the collector of debt buys defaulted debt from an original creditor for the purpose of debt collection. The definitions and coverage have changed over time. The FDCPA itself contains numerous exceptions to the definition of a “debt collector,” particularly after the October 13, 2006, passage of the Financial Services Regulatory Relief Act of 2006. Attorneys, originally explicitly excepted from the definition of a debt collector, have been included (to the extent that they otherwise meet the definition) since 1986.
The FDCPA’s definitions of “consumers” and “debt” specifically restricts the coverage of the act to personal, family or household transactions. Thus, debts owed by businesses (or by individuals for business purposes) are not subject to the FDCPA.
In the federal tax case of Smith v. United States, the United States Court of Appeals for the Fifth Circuit stated that the taxpayer’s: “. . . . invocation of the Fair Debt Collection Act is entirely without merit, as the statute expressly excludes ‘any officer or employee of the United States . . . to the extent that collecting or attempting to collect any debt is in the performance of his official duties’ from the definition of ‘debt collector.’ 15 U.S.C. section 1692a(6)(C).” In 1998, however, Congress amended the Internal Revenue Code by adding a new section 6304, “Fair Tax Collection Practices,” which refers to and includes certain rules that are similar to some provisions of the Fair Debt Collection Practices Act.
