You have sold a product or service, and the buyer has consented to pay you in installments. Everything seemed ok initially, but then they stopped making payments.
You and your employees have repeatedly reminded them of their payment obligations, yet they do not keep up with their promise. Sending invoices repeatedly hasn’t helped either. They may have even stopped taking your calls or started giving false excuses. What if the invoice that you have sent them have started to come back as mail-return. Now you do not have an alternate contact number or their latest address either. Without taking the help of a professional debt collector, this account is undoubtedly heading to be written off as a loss in your accounting books.
Collection Agencies help small businesses, contractors, medical professionals, schools, financial institutions, even the USA government to recover money from past-due accounts. If there were no collection agencies, billions of dollars of bills would remain unpaid. Can you imagine how much financial loss this would cause to businesses nationwide? Many businesses would close down and layoff millions of employees.
Without collection agencies, millions of borrowers would be more inclined to default on their payment obligations. Our government fully understands the importance of collection agencies as well. Government authorities have laid down the laws which all collection agencies are required to follow. These laws are called the FDCPA Laws.
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collection companies from using abusive, unfair or deceptive practices to collect debts from borrowers. The concept of credit history reports helps lenders to avoid issuing loans to very risky borrowers. FDCPA law is not applicable to a commercial collection agency, there have separate set of laws for B2B collections.
A collection agency can start working on your debt typically after it has been due for over 90 days. Only for medical debts, collection agencies are supposed to work after an account has been 180 days past due. Many people think collection agencies as non-ethical entities. That is not true; the collection agencies must deal debtors with dignity and respect. Collection agencies using intensive techniques to recover money risk of violating debt collection laws.
There are nearly 7,000 collection agencies in America. Collection agencies serving B2C debts are called business collection agencies. Those serving the healthcare industry are called the Medical collection agencies. Commercial collection agencies serve B2B debts.
The majority of collection agencies have a staff of fewer than five people. Larger collection agencies hire hundreds or thousands of people. Hundreds of thousands of people are employed in the collections industry.
Collection agencies can employ several techniques to recover debt. This includes written collection demands that cost about $18 per account. Collection calls service that is contingency-based and collection agency keeps about 35% of the amount collected. The last step is legal collections, which is used on no more than 1% of the total accounts assigned. No one recovers debt better than professional debt collection agencies.
When hiring a collection agency it is always better to ask for references or contact your chamber of commerce. You may also check out their BBB ratings to help you hire a good one.