That said, not every debt collection agency is created equal and not every agency is right for your unique business. Here are a few things you should consider when selecting a partner in the process.
1. Do the Research
Debt collection agencies often specialize in certain areas. Some, for example, excel in securing funds from large companies while others do well working with small businesses or home-businesses. If at all possible, find out what sort of debtors the collection agency most often deals with and what sort of businesses it serves.
2. Verify the Agency’s Legitimacy
Different states and localities have different rules for debt collection agencies. Make sure the one you want to hire is bonded, licensed, and adheres to the rules of the Fair Debt Collection Practices Act.
3. Ask if the Agency Uses “Skip Tracing”
Unfortunately, sometimes debtors skip town. To combat this practice, good collection agencies use what is known as “skip tracing”, which means that they use and have access to several databases that allow them to locate a debtor who has left no forwarding address. This is especially important if you’ve been personally contacting your debtor and have been routinely ignored.
4. Make Sure the Agency has Insurance
No matter how much research you do, there’s always the possibility that a debt collection agency uses aggressive tactics or that the debtor feels the agency acted in bad faith. In these instances, the debtor can sue. Whether or not you win the case, you want to make sure that you won’t be held liable for hiring the agency. Get proof of insurance from your debt collector in the unlikely event that your debtor takes you both to court. This is most often called “Errors and Omissions Insurance” and is held by good debt collection agencies as protection.
This article was first posted in Five Tips for Hiring a Debt Recovery or Debt Collection Agency
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