As a former corporate attorney and owner of my own collection firm, I am shocked at how little people know about the practices employed by the agencies and firms they hire to collect their money. While the pitfalls are numerous, here is a sampling of some things I feel you need to know BEFORE you hire a collection agency or law firm.
- Are they licensed and/or bonded as required by individual State laws? I am a firm believer in agencies and firms that are local and not interstate. By staying local, you can be assured that the agency understands local business practices and State laws.
- Do they ascribe to the motto “Positive Relations Maintains a Positive Reputation?” Again, stay local! The more concentrated the area where an agency or firm operates, the better it will understand the value of maintaining your good reputation within the community. Managing emotions and diffusing the anger of debtors is a supremely important part of collections. What good is the extra $$$ collected if the agency or firm engaged in harassment or abuse to get it for you? By doing so, you will likely lose a heck of a lot more than what is collected in future business revenue due to negative word-of-mouth.
- Are attorneys consistently reviewing their internal practices? The collection industry is, unfortunately, fraught with agencies and firms that do not adhere to Federal and State laws. Collection laws are very precise and even seemingly small mistakes such as an agency or firm calling a debtor at the wrong time of day or failing to give a requisite disclaimer can be cause for statutory fines. And all too often the cost of these fines ends up being passed onto you the creditor! Which brings me to …
- Did you sign a detailed written contract prior to sending over your first account? Yes, while it is true that as a corporate attorney I have an odd affinity for contracts, I believe detailed contracts protect BOTH sides. Before signing up with an agency or firm, make sure they provide you with a detailed agreement setting out all aspects of the relationship from fees and pricing policies to how disputes will be handled or an account can be terminated. If given a two-page agreement that requires a magnifying glass to read, RUN! What seems simple now will only cause you headaches - and cost you money - later. Know your rights and what you are getting in clear 12-font English.
A qualified and reputable collection agency or law firm can make a big difference in the collection of your overdue accounts. Armed with just some of the above knowledge, you can forge ahead to find the right agency or firm for your particular business and needs.
Laura J. Lowenstein, Esq., owner of Capital Resource Management, Inc., specializes in all aspects of receivables management for physicians and small businesses ranging from personalized debt recovery plans to the filing and handling of no-fault arbitration and litigation proceedings. For more information, email firstname.lastname@example.org or visit www.crmcollect.com.