Choosing a professional
collection service to collect your delinquent accounts receivable requires careful
consideration. The decision involves more than simply awarding your business to the
lowest bidder, as the quality of the service you use will affect both your bottom line and
your public image. Also, getting the most from using a collection firm requires
mutual cooperation and good communication. Here are some facts to consider:
References and Reputation
Ask for at least two references, preferably in the same or similar business that you are
in. If you're in a service business, look for clients in a service business.
If you're selling merchandise, look for other businesses selling retail merchandise.
Find out whether the firm has a good reputation in the community with merchants, other
credit grantors, the Better Business Bureau and the Chamber of Commerce.
Rates and Recovery Percentages
Rates and fees are usually charged on a contingency basis or on a combination of up-front
fee and lower percentage. Selecting a collection firm solely on the rate it charges
may not be the best decision. A firm that charges a low rate may not work your
accounts as thoroughly and may collect on fewer of them. A firm that charges a
higher rate may work accounts more thoroughly and recover more of them. The most
important consideration for any creditor is the net return based on a combination of rate
and recovery.
Compliance with Licensing and Bonding Laws
Check whether the firm has complied with your state's licensing and/or bonding laws, if
any. If state licensing or bonding is not required, check references and length of
time the agency has been in business.
Collection Procedures and Policy
Ask what procedures the firm uses to collect, including when it would start work on your
accounts after receiving them, the collection letters it uses, and whether it has trained
telephone collectors and skiptracers. A visit to the collection office can be helpful, as
you can observe the collection agency in operation. Ask about the office collection
procedures and policies.
Remittance Schedule and Reporting
Find out at what intervals the firm will be remitting funds to you that it has collected
on your behalf. Also ask about account status reporting to find out what procedures
and capabilities the firm offers.
Collector Training and Certification
What training do the firm's collectors receive? Are they educated in effective,
professional collection techniques? Do they know how to comply with the federal Fair
Debt Collection Practices Act (FDCPA)? Collectors who work for American Collectors Association, Inc. (ACA) members
have access to educational materials and seminars covering all aspects of collections.
ACA also conducts certification programs for collection professionals.
Collectors can earn certification by successfully completing courses on the FDCPA and on
professional telephone collectors' techniques and by passing a stringent exam.
Skiptracing and Forwarding
How does the collection firm locate debtors who can no longer be reached at the addresses
or phone numbers listed on their accounts? Find out about the firm's skiptracing
capabilities. Also, what are the firm's procedures regarding forwarding of accounts
- the referral of accounts to another collection service in the locale to which the debtor
has relocated? Members of ACA have access to a large forwarding network through
ACA's roster of 3,750 members.
Special Services
Ask about client services that the collection firm may offer. Some firms offer
client seminars or consultation on developing effective credit polices, precollection and
other credit and collection-related topics.
Membership in a Trade Association
Look for membership in state and national trade associations such as the American Collectors Association, Inc. (ACA).
Membership in ACA ensures that the firm has been screened by the organization before
acceptance. Also, ACA members agree to adhere to the association's code of ethics,
which covers client relationships as well as proper handling of consumers.
