Debt Collection- Collection Agency- Debt Collection Agencies

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Should You Handle Your Own
Debt Collection Or Outsource It?

At some point in every business owner or finance manager’s life the question comes up as to whether you should handle your own debt collection or not. Following are some points to keep in mind when deciding whether or not to hire a collection agency for your debt recovery.

Debt Buyers vs. Fee-Based Debt Recovery

First, keep in mind that debt collection should cost you no money up front. Some debt collection agencies will buy your debt from you, meaning they pay you a percentage of the money owed and in return you give them the right to collect and keep whatever they can get. Another option is to allow them to keep a percentage of whatever money they recover. Either way, you don’t need to pay anything up front so using a collection agency is often a wise decision because they are more skilled at getting a higher percentage of your money back.

Debtor's Right To Dispute

Debt collectors work with certain proven tools. You may think you’re collecting debt by sending copies of your invoice, but collections letters need to inform the debtor that they have 30 days to respond if they wish to dispute the facts. It’s often a good idea to send repeated copies of this type of letter so it can be a little bit time consuming. In addition, if the debtor does dispute the debt, you’ll have to know how to prove your version of the facts. Collection agency professionals handle this type of problem every day.

Credit Bureau Reporting

The next thing that needs to be done is reporting unpaid bills to the credit bureaus. This often causes consumers to pay on past due accounts because they want to keep a decent credit score.

However, some consumers won’t pay, in which case you still need to actually report the debt to the credit bureaus. This is a very time-consuming process because it often results in a back-and-forth. You report the debt, the consumer disputes it, you have to back up your accusation and the consumer gets another chance to respond. Sometimes the consumer will contact you asking to work something out where in return for payment, you agree to let their credit report be expunged. This is illegal in some places so using a collection agency that is well aware of legal requirements can save a lot of problems down the road.

Private Investigation As A Debt Collection Tool

Next, collectors need to use private investigators or private investigation software to locate the debtor if he or she is avoiding phone calls or letters. Many collection agencies offer investigative services in-house, but if you do your own debt collection you’ll have to secure an investigator or do your own searches online.

The reasons to do this are many. First, if you can’t get the debtor on the phone, it’s impossible to work out payment arrangements with him or her. The other thing is that some debtors, when they learn they can’t hide from you, become much more amenable to working things out in order to stop the collections calls and letters.

Payment Arrangements For Debtors

The final process in debt collection is working out a payment agreement for the delinquent account. While ideally you’d love to get the whole amount paid, most of the time this isn’t possible up front, which leaves you with one of two choices. You can get a partial settlement paid in a lump sum, or work out a payment plan. Each method of debt collection has its benefits; the lump sum will give you more money up front, while the payment plan can earn you more money in interest.

If your business has decided to outsource your debt collection, fill out the form below. One of our consultants will contact you in 24-48 hours.

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