Adams, Evens, & Ross Newsletter #12:
ATTORNEY VS COLLECTIONS
I have been asked more than once, "Why should I use Adams, Evens & Ross instead of a law firm?" My answer may surprise you, but I promise that if you continue to read this note you will pick up a few valuable insights and this article will not be a five-minute commercial for Adams, Evens & Ross.
With this disclaimer, let me walk you through the different mindsets.
Let's say, for example, you are owed $10,000 and the debtor has told you he/she is not paying because of "X." It's clear that you need to turn up the heat. If you turn the account over to an attorney, he/she will send a letter that basically says, "If you do not pay in 30 days, I will sue you." Nationally, about 5% of these letters get an immediate response of payment. The other 95% goes to the 30-day mark and the attorney calls you and says "they are not going to pay so we need to file suit." Now, I am the first to admit a lawsuit can be a VERY effective process.
We collect 88% of the debts in-house so that means we do not collect from a little more than one in ten, and we recommend suing in half of those cases. We typically receive about $125,000 each month from our forwarding attorneys, so I am a believer. But here is where the similarity ends and the strategy begins. We use a lawsuit at the end of the process, not at the beginning. Before I tell you to file suit, I want to try to get this account resolved within 30 days. Suing is a longer process. As I mentioned earlier, the $125,000 that we collect every month from our forwarding attorneys is pretty good, but we typically would have had a suit filed for about one year before getting to that point.
The other difference is really Apples and Oranges.
The attorney's mind-set:
- Send a letter
- File suit 30 days later
- Look for assets after getting a judgment in 12 months
The Adams, Evens and Ross' mind-set:
- Run through collection
- Locate assets
- Evaluate the debtor's credit
- Evaluate the debtor's behavior when sued in the past: did they pay if they were sued, did they counter-sue, are there other open judgments, etc.?
- Then recommend suit
The difference in success is pretty amazing
Nationally, attorneys collect on about 7% of their judgments.
Adams, Evens & Ross collects on about 84% of its judgments.
There comes a time when you have to sue someone; that is a fact of life. But after 20 years of providing collection services for the staffing industry, I can honestly say that attorneys are not very effective at collecting debt. They are great at suing people but they are really pretty bad at collection. The downside to Adams, Evens & Ross is that we are not a law firm. We cannot sue anyone. But we do have a network of 400 attorneys nationally with whom we work as a "team." So, if we have to sue someone, they handle the legal end and we help locate assets. The reason we can find assets better than most law firms is that we have the investigative resources that most law firms do not have.
I realize that I have clients that will use our collection service, but if they need to sue someone, they use their own attorney. I understand the logic. But this is what I recommend in those cases: Allow us to work the account for 30 days. If we are unsuccessful, I will close the account and you owe me nothing. I will then provide you with all of the credit and asset information free of charge to pass on to your attorney.
This is what I do not want you to do because if you do, it would pretty much assure that you will have to sue all of the accounts that you send to me.
Please never have your attorney send a letter or contact the debtor before you send it to me. Let me explain why. When the debtor is contacted by your attorney and he/she sends out the letter that says "Pay or I sue in 30 days" and then does not sue, then you and I have lost all credibility. The debtor may even interpret that as meaning you may not have the money to sue them. This will always assure that you have to sue the debtor.
It is so much cleaner and effective for you to run the account through collection in a normal and controlled escalation of events. Then, if we are not effective, I can close the account and then you can have your attorney send the pay-or-be-sued letter and the debtor now feels that this issue has escalated. Naturally, in essence, we set up your attorney (or our forwarding attorney) for success. If you'd like to book a free 30-minute consultation with Wilson Cole to discuss a collection issue or a credit risk issue, go to our web site at www.aercollections.com and click on "book a free 30-minute consultation with Wilson Cole." pick an available time slot and fill out the form.