Finding the right debt collector doesn’t need to be a struggle. If you know what to look for, such as what types of debt they can collect on and what they can do for you, then the process of narrowing down the right debt collector is easy.
What Do Debt Collectors Do?
Debt collectors can work independently or for a debt collection agency, or they can be attorneys who also specialize in debt collection.
There are several ways that debt collectors can work. They may work for the original creditor, in which case the creditor will pay the debt collector a percentage of the debt collected. This amount is typically between 25 and 50 percent of the amount received.
Debt collection agencies can also buy out the original debt for a small amount of the total owed, then they own that debt. Any money that they collect, they keep. The original creditor forfeits any claim to funds collected by selling the debt.
Some debt collectors will also negotiate settlements with the consumer themselves, particularly with difficult-to-collect debts. They may allow the individual to pay a smaller amount for paying in full or offer them the option of making payments.
In some cases, debt collectors refer cases to lawyers, who then file lawsuits against debtors who’ve refused to make payments.
What Can They Collect?
Debt collectors can collect any type of delinquent debt, including:
- Credit card debt
- Medical bills
- Car loans
- Personal loans
- Student loans
- Business debt
- Unpaid utility and cell phone bills
A bill must be delinquent before a debt collector can accept it. Delinquent accounts are those that are at least 60 days past due. They must also stay within the statute of limitations within the state in which they function. Each state has different requirements for legally pursuing debts, such as how old the debt can be once it is no longer able to be collected.
Collection agencies often specialize in specific types of debt. For example, they may only work with medical debt or they may only accept delinquent debts that are a minimum of $300 and are less than two years old.
4 Best Tips in Picking the Right Debt Collector
You want to choose a debt collector that is able to retrieve the maximum amount of money from the debt owed to you. However, beyond that, you want someone who is transparent about his methods and costs and someone who presents himself in a positive manner to your clientele. Below are four tips in picking the right debt collector.
One: Find a Debt Collector that Works With You
Look for a debt collector that offers to be your partner, rather than one with their own interests in mind. The right debt collector will work to improve your bottom line using methods that are specific to your organization, such as developing an accounts receivable system that is designed specifically for your company.
Your best option is to find a debt collector or agency that reviews your accounting process and recommends methods of improving in-house collections, rather than working separately to retrieve your funds.
Two: Customer Service Is Important
It wasn’t long ago that debt collectors had a bad rap. They’d persistently call during the dinner hour or late at night, making demands and threats and basically scaring unsuspecting debtors. Today, the whole field has been revamped and the stereotype is thankfully fading away and being replaced instead with the friendly, helpful manner of the modern debt collector.
Find a debt collection agency that reaches out to customers with delinquent accounts to offer them various ways to catch up their payments. They may help your customers create individualized payment plans that fit their budget. Debt collectors could offer various payment options, including check, money order, or credit card. They may also offer numerous payment methods, such as through the mail, over the phone, or through a secure online payment system.
The debt collector should not only maintain that friendly attitude with your customers, but she should also be as helpful and accessible to your staff, as well.
Three: Choose a Debt Collector Based on ROI
You may be tempted to choose a debt collector based solely on the percentage they charge. We’re used to making buying decisions by looking at a price tag, but cost isn’t the only thing involved in determining a good debt collector. Sure, it’s an important part of the equation, but there are other factors that affect the overall value.
Take time to research each collection agency or debt collector to find one that can increase your profits by collecting the most money. For instance, agency A may charge a low percentage, but focus only on easy-to-collect debts, ignoring more difficult accounts. Whereas agency B charges a higher percentage, but is able to collect on accounts that have had no response, bringing in more overall funds. In the end, agency B has greater recovery rates and a better ROI.
Four: Get Reviews and Referrals
Always ask about the results the individual or agency has had with other businesses, specifically reviewing their performance with companies in your industry and of your size. Look online to find public reviews of each debt collector or collection agency you are considering. Ask other local businesses for referrals, particularly if they’ve worked with a debt collector that you’re examining. Check with business contacts, your local Chamber of Commerce, and the Better Business Bureau to fully understand the methods and effectiveness of each debt collector or collection agency that you might hire.
Picking the right debt collector might seem like an overwhelming prospect, but with a little time and analysis, you can find one that helps improve your cash flow. Be sure to compare various options and choose one that will be a true business partner with your company’s success at heart.