The US economy is credit-driven. Here consumers have the option to purchase goods and services and pay for them over time. However, these transactions may go unpaid. At this point, creditors and lenders often outsource the task of recouping debt to a professional third party debt collector. In the case of banks and financial institutions, they can always partner with a credit card debt collection agency.
The collection industry serves a vital role when it comes to recovering outstanding debts owed to creditors and service providers. It also provides a level of confidence, especially when it comes to making credit available to a wide range of consumers.
Forward account to collections
When placing accounts with third party debt collectors, they are tasked with managing the day-to-day activities of the account. This also includes the majority of communication and collection activities associated with these accounts. Here, the status of placed accounts within the originating creditor’s billing or collection details when the account gets closed or placed.
There are also real-time or near-real-time updates between the creditor and the agency. Accurate, reconciled balances and statuses reduce the chances of FDCPA and other regulatory infractions.
Functioning
On receiving accounts from creditors, collection agencies must perform a series of actions designed to ensure that the account is eligible to be collected, secure the most accurate or available data about the account holder and load the account into the database.
Recovery techniques cover sending letters and emails, telephonic communication, and credit bureau reporting to name a few. The debt recovery services act between the creditor and the consumer agencies. They try to obtain payments in full, negotiate payment arrangements, agree on a settlement amount or help the consumer work through the process of disputing the debt for various reasons.
You can contact third party collection services to work through the process of disputing the debt for various reasons. Agencies are typically contracted to perform the accounts for a specified period; those that aren’t successful in resolving things within the period will be returned to the creditor, where they may quickly replace the accounts with a different collection agency.
Benefits
Debt collection agencies are an extension of the organization. Therefore, they must embody the same values that are meaningful to the company. Here are key advantages you can get as a part of the third party collection services.
- Operational efficiency in contacting consumers
- Highly compliant with consumer protection
- Invested in specialized technology
- The solid financial incentive to recover the debt
- Agencies simplify staffing, retention, and training of the creditor’s employees
Fundamental dynamics to hiring a collection agency
Debt recovery services must embody the same values that are meaningful to the company. However, prior to engaging in a relationship with any firm, especially the credit card collection firm, you must take the following steps and ensure that they are set up for success.
- Compare the prospective agency’s expertise with the type of accounts
- Commercial vs. consumer collection
- Characteristics of the accounts: balance, volume, industry, etc
- Geography- Placing accounts nationally or regionally
- Interview each prospective agency or initiate a formal RFI process
- Ask for references and check them
Outsourcing a professional third party debt collectors
Collection agencies provide services to creditors and lenders. This allows them to outsource the recovery process to a third party collection service. In most cases, a credit card debt collection agency is specially tooled for recovery management.
These collection agencies invest in sophisticated telephone dialer technology, template letter generation, and mailing and staff like a call center. Additionally, there are many compliance issues and legal rules for collections; a debt collection agency includes targeted training for its employees.
One downside here is that collections are an extension of customer service; as a result, they’re trying to get the customers to resolve an unpaid account. So if you engage with an agency, it’s essential to ensure a tight relationship with them.
To be able to understand how customer interactions get handled and, perhaps most importantly, run a complete financial picture for each and every outstanding account.
Forwarding your portfolio
Each creditor runs its process and timing when it comes to customer engagement. For example, the collection agency will initiate the process when the debt becomes 60 days or more past due and internal efforts have failed to generate results. Here creditors can write off the debt as an account receivable asset on their balance sheet as the account is unlikely to be paid. As a result, the creditor’s balance sheet looks better, yet the creditor still maintains the ability to collect on an outstanding asset.
Collection agencies work on behalf of the originating creditors. They may try to recover unpaid balances after reaching out to the consumer via mail and telephone. A reputable debt collection services acknowledges all the government regulations and their client’s work standards while trying to recoup these unpaid debts. Some agents try to get consumers on the phone and make payment arrangements, either as a lump sum or via recurring payments.
These third-party debt collectors receive a commission percentage on the amount of money they successfully collect. It would be best if you also kept in mind that the commission may vary as per the age, balance, type, and number of times the account has been previously worked.
Generally, the older the account, the more challenging it becomes to collect payment. For this reason, later-stage collections tend to have a higher commission rate as the chances of recovery are less.
Partner with a collection firm
The bottom line is how much you make. When a creditor assesses whether to continue an internal recovery attempt versus outsourcing collections to third party collection services, the creditor needs to have a firm grasp of the estimated net yield of each method and compare that against the cost of paying commission versus the cost of operating a highly specialized, intensely trained team of customer support specialists.
Getting a managed service simply helps you out. Here, lenders can concentrate on their core business. However, to run a successful operation with outside vendors, the lenders must run complex systems and processes to measure productivity and compliance and continually monitor consumer interactions.
For more considerable collection challenges, it assuredly means some kind of automation. For example, running a technical solution to help manage account movement, measure and monitor vendor performance and compliance and safely store consumer information.
What must you expect?
You need to evaluate whether or not a particular agency is a good fit for your business. You need not sign up with the least expensive one out there because you often get what you pay for. This doesn’t mean you must run the most expensive one. If you’re searching for a collection agency, here is what you can expect,
Experience
The debt collection industry is highly regulated. Therefore, it’s important you partner with an experienced and knowledgeable firm. You can always check the company’s reputation, including whether or not they have worked with others in the industry.
Proper credentials
Debt collection rules vary from one state to another. However, not every debt collector is licensed to practice in all states. Therefore, before you trust someone else’s hands, you must ensure they are licensed for the state where they do business.
Customer service
Debt collectors may have a bad reputation; however, you never want to resort to intimidation and scare tactics and get the money owed. It’s essential to ensure that the third party collection services understand they represent the company professionally and protect the public image.
Security
Data is pretty sensitive here; as a result, it’s extremely important that the collection agency runs a communication process via a secured platform. The agency must also ensure that they use a web-based portal for receiving payments, and every precaution should be taken to protect personal client information.
Credit reporting
According to the Fair Credit Reporting Act (FCRA), some agencies are classified as data furnishers. This means they have the ability to furnish both debt collection and loans placed for loan servicing to Credit Reporting Agencies.
Final Wrap
When looking for debt recovery services, you must partner with a professional service provider with long-term experience. At Vital Solutions, we secure state-of-the-art technology and proven methods for locating consumers and recovering the money you’re owed.
