What is a collection agency?
How can one help me?
What is a collection agency?
The world of debt collection can be confusing. There are many imitators and intimidators out there.
From the scope of a collector and their work, to different things to look for, we break it down for you.
What does a collection agency do?
Commercial vs. Consumer Collection; What's The Difference?
The world of debt collection is split into two worlds, commercial debt and consumer debt. These debts share some similarties, but have two completely different sets of laws backing them. It’s important that you work with an agency that is bonded & insured to handle your specific type of debt.
How does the process work?
Contacting The Debtor
Making contact with the debtor is one of the most crucial parts of the collection process. Most people find conversations about debt uncomfortable and understandably so. However, things can’t get done until the right parties get on the phone.
An agency may start reaching out in a variety different ways to try and make contact with a debtor. These channels may be restrictive based on the type of debt.
Credit Reporting & Attorneys
Credit reporting is a long term way that agencies will get debtors to pay. By marking the unpaid debt on a debtors credit report, it becomes increasingly difficult for them to open any lines of credit.
Agency’s may also involve attorneys in the collection process. From sending demand letters to getting accounts ready for the litigation process, attorneys provide a wide use of tools for an agency.
How do agencies make money?
Lowest return for client, pennies on the dollar
Agency buys the debt, you no longer have claim
Guaranteed to have some sort of money returned to you
Collect On Contingency
Highest return on investment for client. No collection, no fee
Agency gets paid off of a percentage of what they can collect
More money returned, but contingency rates can vary
Contingency + flat fee
Middle return for client, up-front costs + extra if successful
Agency charges fees on placements, takes a smaller contingency fee
Collection isn't guaranteed, you could end up paying more
Beware of the scammers, go certified!
There are a lot of unethical agencies out there that are not working in the best interests of their clients. Shady actions can be abusive practices to the debtors, working without bonding & insurance, not having a license to practice in states that require it, and worst of all not remitting to their clients.
There are organizations that are out there to sort the pretenders from the legitimate agencies. We listed a couple of them below:
International Association of Commercial Collections (IACC) & Commercial Law League of America (CLLA)
Undergo an intense audit conducted by an independent CPA firm to ensure that all members are correctly remitting to their clients while conducting ethical business practices.
Require $300,000 in bonding and licensing in states that they practice in.
Yearly recertification to ensure that all agencies continue to uphold ethical practices.
Management is required to attend yearly educational events to remain up to date on the newest industry laws and happenings.
The Association of Credit & Collection Professionals (ACA)
ACA International connects third-party collection agencies, law firms, asset buying companies, creditors and vendor affiliates. While working mainly with the consumer side of collections, the ACA certification ensures that you are working with an agency that follows all the FDCPA guidelines and commits itself to educating their collectors on correct legal practices.
Educational services to all of their members, keeping each collector updated on all new rules and regulations.
Bonding and insurance, protecting both you & the certified agency from any poor practices.
Annual Conventions & Expos, connecting your agency with resources to help improve their processes.