Choosing a collection agent
Choosing a collection agent is tricky, especially since it can be hard to predict a firm's success with delinquent accounts ahead of time. A few areas to investigate:
Experience with your industry
Your business may require unusual collection tactics or have specific regulations that apply (for example, collections for medical practices must adhere to HIPPA). It is wise to choose an agency that is familiar with your specific needs. Government, student loans, and medical accounts are all examples of when specific expertise is important.
Reputation of the firm
Make sure to check a collection agent's references, particularly from clients that are in a similar business. Call the references and ask their opinion of the collection services, if they have had any problems, and what their typical success rate is. Also check the company’s standing with the Better Business Bureau and whether or not they are accredited by industry groups like the International Association of Commercial Collectors.
Method of collection services
As mentioned earlier, you may be held liable if your collection agency doesn't interact with debtors in accordance with numerous laws. Be sure to examine the letters that will be sent, ask about the training telephone collectors receive, and review the scripts their representatives use so you can be sure the agency’s methods are professional and respectful. Also, find out how they handle legitimate excuses or hardship cases.
How they handle skiptracing
"Skiptracing" refers to how the collection agent finds debtors who have disappeared and can no longer be directly contacted. This is particularly important when collecting from individuals. Fortunately, newer technologies have made this job somewhat easier in that the various databases collection agencies rely upon are more likely to be cross referenced and up to date. Agencies may also use the Internet or contact friends and family in an attempt to locate debtors; however, they must carefully comply with applicable regulations.
Some states require collection agencies to obtain licenses before they can pursue debtors located in that state; others require different licenses for agencies headquartered in their state. Ask potential agencies what states they are able to collect in, and how they handle accounts in other locations. Often, agencies forward accounts from outside their coverage areas to other agencies, which can save you the hassle of shopping for agencies that cover many different areas, but will result in a lower percentage of the collected debt being returned to you.
Bonding and insurance
A payment performance bond ensures that you get paid when the agency collects on one of your delinquent accounts because if they do not you can file a claim against their bond. When considering an agency be sure to check the status of their bond and whether there have been any claims against it.
An Errors and Omissions Liability insurance policy can benefit both you and your collection agent by protecting against lawsuits unhappy debtors might file for perceived harassment. An up-to-date policy can be a sign of a collection service that is responsible and conscientious.
Your collection agency should streamline your administrative processes as much as possible. They should be able to provide whatever reports you need and remit payment of collected accounts in the form and on the schedule you dictate. Many agencies today offer 24/7 online access to your account so be sure to review the customer interface: is it easy to use? Does it provide you with detailed information on the status of each collection?
Some agencies also offer services such as billing services, accounting, and other administrative functions, to compliment their debt collection services. This can be an easy way to ease the burden on your accounting department.
Collection services don't require long-term contracts or exclusivity. Try a few different vendors and see which produces the best results before settling on one firm. Even after you have chosen a primary collection agency, it can be worthwhile to send a few delinquent accounts to a different agency just to compare ongoing performance. Important note: do not send the same account to more than one agency--that is illegal under the FDCPA.