It is good to look for alternative ways to collect debt from your customers. However, if all other avenues have failed, you may have to use debt collectors to get your cash. Every agency is different from the other and not every one that is right for your kind of business. Here are a few things to consider.
Some debt collectors specialize in dealing with large businesses while others deal with small businesses and households. Check in your locality for the collectors that target similar clients like the one that has defaulted. The method the agencies apply has a high likelihood of succeeding in your case.
Every state has its own regulations that cover how debt collection is done and how the agencies work. It is important to ensure that you select a firm that adheres to Fair Debt Collection Practices Act. Moreover, the firm should be bonded and licensed to work in the locality.
Sometimes the firms use very uncouth means to collect the debts. This may raise legal cases if the debtor feels that the agency has acted in bad faith. The insurance ensures that you are not held liable for hiring the agency to collect the debts. Ensure you pick a firm that has a valid errors and omission insurance. It will act as your protection if you are dragged to court.
Once you have a list of a few companies, take time to compare their costs. Different agencies use different formulas to come up with their rates. Some charge a small flat rate mostly associated with pre-collection activities. You are then charged a contingency fee that is part of the amount collected. The charge is about 20% to 30% of the amount collected. Pick a company that offers a no collection no fee model.
Some debtors tend to run away with your cash and ignore your calls. Some even skip town. If this is your situation, ask if the agency you are using has a skip tracing service. This service enables the debt collector track the defaulting client even when they have not left any forwarding address.
Just remember that you shall not receive all the cash once you have hired a debt collection agency. For this reason, it is advisable to exhaust all of the other means of collecting debt before asking for help. However, if none of the other methods work, hire a firm that will collect the debts right away.