Third Party Collection Agency Experience -
Positives And Negatives

by Zeenia
(Ghaziabad, Uttar Pradesh, India)

Though I have not used a third party collection agency, but I have worked for one. The decision on whether or not to use a third party collection agency solely depends on the business owner. However, I can provide a detailed analysis on what are the positives and negatives of using third party collection agencies.

Positives:

An organization, for instance a bank, a credit card company or a financial institution may not have specialized staff trained in debt collections. Moreover such a financial institution will have lots of other sections to take care of, like serving their customers better, running their business, etc.

It may not be feasible for them to set up an entire department dedicated to debt collection from delinquent clients, as it would incur additional cost for training, infrastructure, etc. It is much more profitable for such organizations to outsource professional help from people who are specially trained in this field and know their job well.

Third party collection agencies usually work on a commission basis where a percentage of every dollar collected goes to them. This is how they earn their profit, whereas the original creditor is able to recover a certain amount from a delinquent client, which would have otherwise been a potential bad debt. Hence it becomes a win-win situation.

Negatives:

There is a negative side to this too. For a financial institution, a delinquent client is still a customer and it will deal with the client keeping in view the future business that he will provide to the institution, regardless of his current situation.

However for a third party collection agency, this is a person from whom they have to collect a debt and that’s about it. Once the debt is collected they would have no contact with the client ever again. And hence their style of dealing with the client would be very different.

It could also go to the extent of being harsh, because they do not care whether the client gives more business to the establishment in the future or not. They are happy as long as this debt is collected so their interest in the client is short-lived.

From the clients point of view it’s a debt that the business is collecting from them, by means of the third party collection agency. In this process many a times it happens that the client becomes negative regarding the treatment received and withdraws all its future dealings with that business, causing future loss to it and also may cause bad goodwill.