Important Tips Before Hiring a Debt Collection Agency

Posted on: 19 November 2015

A debt collection agency can help you collect on old debts and save you from all the work and effort of setting up repayment plans and other options with your clients and customers. But hiring debt collectors is not something you want to do haphazardly, as you want them to be effective but also to act within the law. Note a few simple but important tips for hiring a debt collection agency.

1. Check their licensing and insurance 

Each area will have different laws when it comes to debt collection, so you want to ensure you choose an agency that is properly licensed. This is so you know that they will adhere to the law in your area. You also want to check on their insurance, because even if they seem very professional, there is always the chance that someone may say that they acted too aggressively or did something to violate the law. You don't want to pay any such claim yourself, so ensure the agency has adequate insurance.

2. Note if they have a specialty

Some agencies will specialise in collecting from corporate clients and some will specialise in collecting from individuals. Some might also work more with small businesses or within a certain industry, such as construction or retail. Whatever your business or industry, check on the specialty of any potential agency and choose one that has a history of helping clients like you.

3. Ask about their skip tracing abilities

If a debtor skips town to avoid paying debts, a debt collection agency should have access to many different types of databases in order to find them in another city or state. It's good to ask about their skip tracing abilities so you know how many of those databases they can access in order to find those debtors that move often or that have not left any type of forwarding address.

4. Contingency versus flat fee

A flat fee means that a debt collection agency will charge you a certain amount, whether or not they actually recover debt. A contingency fee is a percent of the amount they do recover. If you have dozens if not hundreds of old accounts, such as from credit cards that go unpaid, a flat fee may be good as the debt collection agency will need to work constantly to recover those amounts. If you have fewer but larger amounts owing to you, the contingency fee can be the better choice. Be sure you've compared them thoroughly before making your decision.


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As a high school teacher, I am responsible for the “Life Skills” curriculum for senior students. When I first started teaching thirty years ago, the biggest problem was helping students to decide which car insurance to buy. These days, some students in my classes have already left home and are self-supporting. In some cases, they teach ME about budgeting! There are many new options available now with online banks, new insurance products and increasingly flexible payment options. There are so many financial opportunities, and pitfalls, for my students. I make sure that I keep up-to-date in order to provide valid information. I realise that it isn’t just my senior students who are trying to navigate their way through this brave new world of money and finance. This blog should help you to learn about the latest in financial news. I really hope that you find it useful.