Occasionally, a business will have to deal with the issue of collecting unpaid debts. It may seem unsavory, but it is a necessary fact of running a business. Selecting the right debt collection service can make the process manageable, if you keep these ten tips in mind:
1. Find a debt collection service that is experienced with recouping monies owed to businesses that are similar to yours. Is your business home-based? Is it a small organization or a large company? Choose one that has handled the debt collection for others in your category, for best results.
2. Ensure the collection service does skip tracing. This means that they are experienced at locating debtors who may have moved, leaving no forwarding address. They need access to various data bases in order to do this.
3. Make sure the agency is fully licensed in your state. If you know that the debtor lives in another state, find a debt collection agency that is also licensed to practice in that state. Generally, an agency that is licensed nation-wide is suitable for debts that emanate from a variety of locations.
4. Always ask to see proof that the debt collection agency carries “errors and omissions” insurance. This is very important, since it covers both you and the debt collection service from being sued by the debtor for illegal collection tactics.
5. Make sure you understand the agency’s fee structure. Is it a flat fee upfront, or on a contingency percentage basis? This fee should be clearly spelled out and easy to understand.
6. Ask how the debt collector will contact your debtor. Will the primary communication be by mail? Do they also make phone calls, and how often? Be sure you are not hiring a company who employs illegal tactics. If the collection agency uses form letters, you should be able to read them over.
7. Good debt collection agents are easy to contact. Make sure they have an easy way to maintain two-way communication.
8. Is this debt collection service willing to keep you up-to-date on your case? That is, regular reporting as to whether any change has taken place or not.
9. Ask if the agency is willing to let you view their financials, or an audit report. There have been instances where a debt collector claims his client as a capital fund, which is illegal. If an agency is unwilling to be transparent, then perhaps it is best to move on to another firm.
10. Does the collection agency practice within the limits of the Fair Debt Collection Practices Act? This is extremely important, as not adhering to these regulations could allow the debtor sue or have the debt erased.
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