Collection Agencies Vs. Collection Attorneys
Tell me if you have heard this one before; a company gets stiffed on their bill. They run to the phone, try calling them multiple times, and now they won’t pick up your calls. What do you do?
“Let’s sue them! They won’t get away with this!” is a very common first reaction. But is this your best option? Let’s look at the world of debt collection and how it’s split up between collection agencies and collection attorneys.
One of the most popular choices when pursuing a debt recovery is using a collection agency. These companies can fulfill a multitude of roles all in one bundle.
· A/R Management, where they handle billing from start to finish
· Collection services, handling any delinquent accounts
· Legal Forwarding, last resorts on collection efforts
· Business credit reporting, reporting debt to the major credit reporting agencies
· And more!
These services can prove to be invaluable to companies who are looking to grow and need the help of a third-party agency to manage their receivables. Collection agencies can be the backbone to many company’s bottom lines and partnering with one can prevent headaches down the road.
Rates for agencies range on a number of factors, the main ones being age of debt, size of debt, and if it had already been placed with another agency. The great part about many agencies is that their services are 100% contingent on success. When you go to the doctor, you pay them whether you feel better or not. With a collection agency, you always end up with a positive return on investment.
Agencies are always great for recovering debts that are more recent. As debt gets older, it becomes harder and harder to collect. While you may take on the efforts to collect a debt yourself, around 60-90 days past due is the time pass it on.
Attorneys have a very positive and negative portrayal to them. While many do great work, they can be costly and time consuming. We usually recommend using an attorney once all in-house and third-party collection efforts have been exhausted.
You can expect an attorney to utilize a couple services:
· Writing a demand letter, notifying the debtor on the intent
· Pursuing a lawsuit against the debtor for the past due balance
· Naturalize judgments into the client’s state, making it easier to collect
Occasionally, we will suggest cases go straight to the legal route. You can expect to see an increase in costs when moving toward a legal direction. At the end of the day, the boatman must be paid! So although attorneys may work partly on contingency, you can expect to pay an hourly rate on top of an up front fee. While you may end up paying more for an attorney, results are not guaranteed. You may end up losing more money while still not having anything in your pocket!
Why not both?
Many collection agencies have begun working with an in-house legal team to offer the best of both worlds to their clients!
Look for collection agencies that are partnered with the Commercial Law League of America (CLLA). The CLLA provides a network of attorneys in every state to certified members of the International Association of Commercial Collectors (IACC). I know that these are a lot of acronyms but hang in here with me.
These lawyers also all work on contingencies. The overhead of a flat fee PLUS hourly vanishes. Legally speaking, the only thing that an agency can’t pay for is your court costs (which vary from county to county but are no more than a couple hundred dollars).
By partnering with the CLLA, agencies have been able to cut down on the risks that their clients face and increasing their return on the dollar. While pursuing legal costs more than a normal collection effort, you leave no stone unturned when it comes to getting your hard-earned money back.
There are a variety of options to pick from when collecting on a debt. What is important is assessing the needs of your business and finding the appropriate partnership. While we might be biased and feel like collection agencies are the answer to everything, we truly understand that we might not be the fit for your needs. We will be happy to explore your needs and point you in the direction that will generate you the best return.
Debt is a natural part of the businesses process, but it doesn’t have to cripple you. Take control of your bottom line and reach out to us today!