If you’ve ever missed payments, you may have been contacted by a debt collector. Debt collectors are hired by companies to collect your debt. They may work for the company you owe, or for someone else. Some collectors buy debts from other companies at a discount and then try to collect the full amount from consumers. At Monetaria, we specialize in helping businesses regain control of their finances by utilizing our premium debt recovery resources.
What is a collection agency?
A collection agency is a company that helps lenders and creditors to recover funds that are past due or in default. Creditors will usually use a collection agency only after several failed attempts to collect a debt.
How does debt collection work?
The creditor sends claim information and supporting documents to the debt collector citing the debtor’s inability to pay. The collection service sends a demand letter to the debtor and an acknowledgement letter to the customer. The collections process normally goes as follows:
- Telephone communication to arrange payment for the outstanding debt.
- The collections agency helps the client to submit the claim to linked attorneys if the debtor does not pay.
- Clients sign and send claims to associated attorneys, who give suit prerequisites.
- If the client allows legal action and agrees to the suit criteria, the lawsuit is filed.
- If the client does not wish to pursue legal action, the debt collection service closes the claim after 60 days of attempting collections
- If a judgment is awarded in the client’s favor, attorneys will file a Writ of Attachment, attempt to locate the debtor’s assets, and attempt to satisfy the judgment (bank levies, garnishment, liens, etc.)
Regulations and consumer protections
The FTC regulates debt collectors under the Fair Debt Collection Practices Act (FDCPA). Debt collectors are barred from utilizing aggressive, unfair, or deceptive tactics. They can’t contact debtors before 8 a.m. or after 9 p.m., lie about arresting them if they don’t pay, or physically hurt or threaten them. Debt collectors cannot seize assets without judicial authorisation.
Benefits of using a collection agency
There are numerous benefits to using a collection agency when you are unable to collect past due debts from your clients. Some of these include:
- Legal protection: Collection agencies know how to operate within federal and local laws, preventing you from being sued for illegal collection activities.
- Documentation: As a part of their everyday work, collection agencies document every step of their processes, providing you with thorough documentation of collection efforts. This is useful to have for legal, tax, and other purposes.
- Successful debt collection: Collection agencies are experienced in recovering debt, increasing your odds of collecting what you’re owed, and letting you focus on running your business instead of trying to collect debts yourself.
- Faster payment: People tend to pay faster when approached by a collection agency, normally to avoid an impact to their credit record
How to choose a collection agency
When selecting a collection agency from your shortlist of possible debt recovery resources, you’ll want to make sure that it meets your business needs and is good at what it does. Here are some criteria for choosing the best debt collection agency.
- Overall ROI: Take a close look at the company’s collection history and recovery rates, not just the percentage charged for recovery.
- Great customer service: Collection agencies should offer payment plans and maintain a good relationship with your customers.
- Research: Take the time to read reviews and talk to other clients who have worked with the agency you are thinking of hiring.
- Licensing: Make sure the agency is licensed both in the state where you are located and where your customers live.
- Past reporting: Your agency should provide a monthly statement with collection rates and payment summaries.
If your business is in financial trouble due to uncollected payments, an agency can be quite helpful. Be sure to pick an agency that fits your needs, maintains strong client and customer relationships, and maximizes results! If you need some help finding the best debt recovery resources for your business, contact our experts at Monetaria Group.
We’re happy you found this article informative! Go back to our blog page to find more tips, tricks and guidance on collections, to ensure your business gets paid.
If you have unpaid debts that need to be recovered, commercial debt collection may be a good option for your business. A commercial debt collection agency can help you with the process of recovering past-due accounts and provide guidance on best practices for managing accounts receivable.
Led by a team of experienced commercial debt collection attorneys, Monetaria Group has helped hundreds of businesses recover and collect their outstanding debts and payments. Schedule a FREE consultation with our expert team to see how we can help you recover your money today!