Choosing a Collection Agent

Choosing a collection agent is tricky, since it is 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 that some agencies may be more familiar with than others. Government, student loans, and medical accounts are 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.

Method of collection services
Examine the letters that will be used and judge whether they will be effective with your customer base. Also ask about the training telephone collectors receive to ensure their methods are professional and respectful, and 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. Agencies should have access to online search capabilities and telephone databases to help locate these debtors.

Geographic coverage
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.

Insurance
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.

Shop around
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.