Businesses large and small find themselves in need of collection services when customers or fellow businesses stop paying their bills. Companies rely on the income from their products and services to keep people employed, to continue operations alive and to work on new and better ideas in their fields. Trying to collect on debts means time and money must be spent in the effort to recover what is owed. There comes the point where outside help is necessary, and debt collection agencies can be the help that is needed.
Currently, around 4,000 debt collecting agencies are operating in the U.S. With that many agencies, choosing what is best for a business can be difficult. The first step in deciding which agency to hire should be ensuring the agencies are operating legally within the state they are collecting from. 32 states and Puerto Rico have laws requiring licensing for debt collectors; several other states require bonds or they may have other special requirements. Knowing the licensing requirements for the collection area will help separate the legit agencies from those that should be avoided.
After determining what agencies meet state licensing requirements then the next step is finding those that are suitable for the business’s industry. Often, collection agencies are specialized in one or two industries, such as medical debt, which ensures they know the regulations and laws regarding those particular billing practices. Staying with agencies that know industry laws can keep legal actions taken up by debtors to a minimum if they would result from violating specific business regulations. Nothing is more frustrating and costly than being tied up in court because industry laws were inadvertently broken. Making sure the collection agency is compliant with industry standards before hiring them can eliminate some collection-related headaches from cropping up.
Regulations that govern collections aren’t limited to industry laws and keep in mind that the company a business keeps is a reflection of the business itself. The methods used by credit collectors have strict federal guidelines they are required to follow, but as with any industry, some players bend or break the rules to get results. Hiring a collector that violates those rules can ruin the reputation of the business that employed them. When consumers and fellow businesses feel attacked by an unscrupulous collector, they can use that association to drag the hiring business through the mud to get even. When push comes to shove, the hiring business can be sued over the illegal actions of a debt collector. If it’s due to the collector intentionally violating collection laws, then that is much harder for a business reputation to recover from than a collector being unaware of industry regulations. If word gets out that a business uses harassing or illegal methods to collect, then those actions can end up stopping customers from returning, or it can sway prospective customers towards other options.
Before a business starts reaching out collection agencies to operate on their behalf, having a working knowledge of the law regarding collections will be a great advantage. Getting familiar with the Fair Debt Collection Practices Act (FDCPA) is the place to start for consumer collections. The FDCPA outlines what actions a collector can and can’t take in the process of collecting, but note it only applies to consumer debt and debts created by operating businesses aren’t covered by the act.
With the above background information, finding a collection agency that will protect a business’s image, and is successful in retrieving debt payments, becomes easier and less stressful. Check within networking circles that include other businesses, legal contacts and partner organizations for referrals to collection agencies they have used or recommend. Referrals from trusted sources carry more weight than blind searches or yellow page advertisements when it comes to finding the right fit. Balance those referrals against the work of the Better Business Bureau (BBB) and the Association of Credit and Collection Professionals (ACA) International. Checking their reviews and information on the prospective agencies can clear up any licensing questions, legal actions, complaints and quality concerns that have arisen. When the list of agencies has been narrowed down sufficiently, then taking time for a face to face meeting should be attempted. Take a look at the operation in person to be sure that their practices fit the goals of the business looking to hire them. It’s generally a good idea to ask if the agency holds Errors and Omissions (E&O) liability insurance. E&O insurance can cover court costs if instances of slander or harassment are claimed against the agency or the hiring business. Ask if the agency can provide proof of their results, as most reputable and competent agencies will be happy to supply information when it advances their own brand. Take the time necessary to find the right fit, so the business is protected, and it gets what is rightfully owed.
