Debt Collection Strategies Used By Collection Agengies That Get Results

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Debt Collection Strategies Used By Collection Agengies That Get Results

Proven and successful debt collection strategies are used by third party collection agencies.

Once you have exhausted all your internal efforts at recovering your past due accounts, its best (and with better odds of recovering your money) to outsource your collection efforts early, rather than later. Conventional wisdom dictates that after you've sent a couple of statements, and made telephone attempts without successful recovery or communication from your customer, its time to employ the debt collection strategies of an outside agency.

Collection agencies have the experience, expertise, and business processes in place to handle problem accounts. They make use of a number of tactics explained below.

Mail

Debt collection agencies typically send out a series of letters, called a demand letter. A demand letter will include the debtor's name, address, original creditor, total amount due, address and contact information for the collection agency and agent. While the first communication with the debtor will likely be a courtesy reminder, the language is intended to remind and encourage the customer to honor his/her obligation.

In the beginning stages, the agency will often give the debtor the benefit of the doubt, stating that the past due balance could have been an oversight, and not an intentional disregard of an obligation. Even though the business hasn't so far been able to collect the debt, many times merely receiving that first demand letter from a third party collection agency is enough to rectify the matter.

Even if the customer has repeatedly ignored the creditor, getting a demand letter can be incentive enough to get them to pay the debt. The fear of damaging one's credit rating, plus the psychological impact of hearing from a third party often does the trick.

Each successive demand letter gets more intensive, as required. Collection agencies have to act within federal and state laws in how they communicate with debtors. They are forbidden from using abusive, threatening and obscene language. Make sure you choose a reputable agency, and ask to see samples of demand letters used. Since the agency is acting as an extension of your business, it is important to know how they're communicating with your customers. Ideally, agencies will act in a manner that both satisfies recovering your money, but also keeps customer relationships intact.

If after a number of demand letters don't succeed (and no collection agency recovers 100% of your money), agencies will step up the intensity by employing more collection strategies.

Phone

Another debt collection strategy used is verbal demands. The agency will attempt to contact the customer at home, or at their place of employment. They might call several times a day, to establish the debtor's work schedule and patterns. Collection agencies may contact family members, neighbors, or friends to ascertain the debtor's whereabouts. They cannot disclose personal information about the debt to anyone besides the debtor, or the debtor's spouse.

Verbal demands are used only to encourage the customer to pay an unresolved debt. While the "heat" is turned up a bit, reputable agencies won't use harassing or abusive language during this stage. Depending on the situation, they may be successful in working out payment arrangements, if the customer is truly experiencing financial hardship. Collection agencies are very experienced with investigating and determining the best solution for each situation.

Skip Tracing

Sometimes it is difficult to reach delinquent customers. They may have moved to another part of the city, relocated to another city or state, and/or changed jobs. The increased use of cell phones, instead of landlines, and PO boxes make accurate locating more challenging.

Third party collection agencies have the requisite search capabilities, databases, software, and other tools at their disposal to help locate these clients. Oftentimes, the success in collecting a debt is locating the whereabouts of the debtor, especially since we live in a very mobile society.

Legal Options

Collection agencies have the option to pursue a case legally, if they deem it necessary. If earlier attempts haven't reaped the right result, and if after the agency's investigation, it can be determined that the debtor has assets enough to pay, they have the right to go after the debtor legally.

What Are Some of Your Debt Collection Strategies?

What debt collection strategies are you using internal to your business or organization? Depending on your time and resources, you can greatly improve your in house debt recovery efforts by incorporating some of the steps mentioned above.

Read what other business owners have said. Learn some of the debt collection strategies they've implemented to improve their recovery successes. Other owners have commented on challenges and problems they're experiencing. Feel free to leave your comments, suggesting what's working for you, or the issues you're facing.

If your organization is interested in getting a debt collection quote, please fill out the quick form below. One of our consultants will contact you within 24-48 hours.

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