Business owners worry about a lot of things. One of the major ones is obtaining payment from customers. A collection agency can help with that. When looking for one, you should consider the fees they charge, their capacity to recover overdue debts, their services, and the collection agency's methodology.
Many companies or business owners will use online search engines and enter the terms "local collections agency" or "collections agency near me" while looking for a debt collection agency.
Given that a competent debt collection agency must possess state licensing, it makes sense for the agency to be situated in the same region as the company.
Each state's licensing requirements can vary greatly, and many need agencies to obtain licenses in the jurisdiction where they are taking payments.
When do you tap a debt collections agency?
When small businesses have exhausted all other options, and the debt is approaching maturity, they generally contact collection agencies.
Five tell-tale signs indicate that you require collections assistance, but each case is different.
- When you initially try to collect the debt from a new consumer, they do not respond. Customers are more likely to reject the outstanding debt if they have no payment history.
- You and the customer agree on a payment schedule, but the customer does not stick to it. Customers that refuse to pay even after you have set out a payment schedule are more likely to let their debts go into default.
- A customer disputes the obligation to pay. These debts are seldom paid back unless you work with a collection agency.
- The customer complains unjustifiably about your company, its goods, or its services. These objections are frequently merely an excuse to avoid paying the bill.
- The client has a track record of being financially irresponsible.
Your chances of recovering your money decrease the longer you allow unpaid bills to accumulate. For example, when an account is 90 to 120 days overdue, most businesses submit it to a collection agency. However, you have a far lower chance of recovering the debt if you wait more than 120 days.
You can do two things on your own before you hire professionals. First, give debtors a few chances to pay what they owe first. Send a formal demand letter asking for money if your calls and emails are unsuccessful.
It is time to seek assistance from a collection agency if the demand letter is not met with a response. They are skilled in following the Fair Debt Collection Practices Act when collecting debts. If not all of what you owe, the agency might be able to recover some of it.
Why search for a local collections agency?
More companies are researching to identify a qualified and licensed agency as more consumers become aware of their rights throughout the debt collection process. This is done to prevent litigation.
Consumers have the right to confirm that the claim is accurate and that the collection agency is authorized to collect the debt before making a payment.
Some states, although not all, demand that debt collectors hold a valid license from their state. Even if the state does not need licensure, it may require that its agency be bonded.
Consumers can submit a complaint under the FDCPA with their State Attorney General's office or the Consumer Financial Protection Bureau if the debt collector is not licensed (Fair Debt Collection Practices Act). The company and the debt collection firm could be hit with financial penalties if the complaint is brought to court.
Finding a local debt collection agency is a smart idea, but there are also excellent arguments for working with a globally licensed partner.
Finding a dependable partner for debt collection in every state may be difficult because every state approaches collection procedures differently. So why would you require debt collectors in each state? Because people move.
Using the U.S. Despite the Census Bureau reporting a record-low mover rate, 11.2 percent of the population migrated between 2015 and 2016.
The collection agency may need to be located in the same state as the creditor in some states. In addition, some states demand that the debtor and the collector reside in the same state.
Will your company invest the effort to look for another debt collection firm if the debtor relocates out of state?
Or would you want to collaborate with a company with which you have already built a rapport and trust?
Here's what to expect…
Your company has to collaborate with a collections partner who satisfies the following requirements to raise the possibilities of debt recovery successfully:
- Licensed, bonded, and insured nationally
- Specialization in your field
- Conforming to industry standards
- Specialized in your industry's specific debt types, ages, and sizes
- Collections procedure compliant with the FDCPA
- Reporting and Transparency
- Fair Fees
You should only work with a company that satisfies these requirements if you need to recover accounts or collect on debts. No longer will it be necessary to check the state's license criteria or find out if your collections partner can collect from specific debtors.
You will be better off spending time working with a reputable debt collection agency to improve your recovery rate and guarantee the ongoing expansion of your company.
To Wrap It Up
In the United States, there are over 4,000 collection companies. That number can seem intimidating and overwhelming when looking for the best collection service for your company.
You can considerably reduce your search for credible agencies by asking yourself these three questions:
- Does the collection company meet your requirements?
- Do they know your industry well?
- Does the collection agency have all the credentials and a good reputation?
Going local is another way to help you filter the list of the best debt collector.
When you go for the ones that show up when you look up "collections agency near me," you can at least guarantee they are state licensed and know the rules of fair debt collection in your area.