Finding the Right Commercial Collection Agency to Fit Your Business's Needs

Commercial collection deals with collecting debt from business to business companies. If you represent a company that would like to recover debt from delivered products or services, one thing is for sure- you will need an experienced agency that not only knows how to collect debt, but goes about it professionally. Here are some tips on finding the right commercial collection agency to fit your needs.

Choose a Company with Experience

One of the key factors in finding the right commercial collection agency to fit your needs is to find one that has experience retrieving debt in a professional manner. It can’t be stated enough that an inexperienced debt collection service many times will not only fail at collecting debt, but also can damage your business’s reputation in the process. Commercial collections is far different than retail collections of individual accounts and requires a totally different approach. In fact, relationship building is a key factor when trying to recover debt from a business to business company. Not only is it imperative to contact people of the company that have control over funds, but build special relationships to encourage them to pay off your debt immediately.

Choose a Commercial Collections Agency that Has a Solid Plan of Action

Many fly-by-night collection agencies simply provide labor and harass the debtor- this usually results in either non-payment of debt, lots of resistance or a bad reputation. Companies that you do business with- whether they owe debt or not will be leery to associate with a business that uses strong arm tactics or acts unprofessionally. Choosing the right commercial collection agency means that an agency will have a plan of action, understand the obstacles of recovering debt and avoid the common pitfalls and mistakes that far less reputable collection agencies make.

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Collection Agency Glossary

The following was sourced from American Student Assistance.

Academic Year -A period of time defined for credit hour schools as a minimum of 30 weeks instructional time in which a full time student is expected to complete at least 24 semester or trimester hours, or 36 quarter hours. For a clock hour school the period of time is a minimuim of 26 weeks in which a full time student is expected to complete at least 900 clock hours.

Administrative Wage Garnishment - Process by which a guarantor, under federal law, may intercept a portion of the wages of a borrower with a defaulted FFELP loan.

Adverse Credit - A derogatory credit status which, in turn, does not meet established status criteria needed in order to approve a PLUS Loan.

Aggregate Loan Limit - The total amount of loan proceeds for which a borrower is eligible by loan and borrower type throughout the student's academic career.

Amortization - The process of gradually repaying a loan over an extended period of time through periodic installments of principal and interest.

Annual Loan Limit - The maximum loan amount that can be approved for a borrower during an academic year.

Anticipated Graduation Date - The date a student is expected to complete the academic program requirements.

Attend Code Change Report (ACCR) - A monthly report generated by ASA to inform lenders and servicers about students who have withdrawn, graduated or have ceased to be enrolled at least half-time. Lenders and servicers require this information as they need to know when to verify a student's entrance into repayment of the interest and/or principal of the loan.

Automated Clearing House (ACH) - A pre-authorized, electronic method of transferring funds between accounts.

Bankruptcy - A person who declares bankruptcy, is found to be legally insolvent and his property is distributed among his creditors or otherwise administered to satisfy the interests of his creditors. Federal student loans, however, cannot normally be discharged through bankruptcy.

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The Pros & Cons Of Using Collection Agencies

Debt collection agencies act on behalf of creditors to collect on severely overdue accounts. Reputable agencies work within specific guidelines and adhere to the legal framework set down in Fair Debt Collection Practices Act, the federal law that regulates all collection agencies.

There are several advantages in using these agencies -

• they remove the hassle of pursuing debts from your company, saving you time and money;
• third party involvement in debt collection has proven time and again to improve your chances of recovering your money; these people are specialists in negotiating with debtors and the results usually speak for themselves
• potentially a skillfully negotiated debt collection could mean continued future custom from the debtor;
• debt collection agencies can combine sales ledger management and debt collection;
• debt collectors keep you within the law...

The disadvantages are -

• debt collection does cost money; you are trading off the debt collection against any charges made by the collection agency and/or a percentage of the money collected (although there are lower cost, flat fee alternatives);
• the debt collection agency will be establishing a relationship with your customers which could be potentially harmful if they sour that relationship by not dealing with invoices in a courteous and diplomatic fashion...

Finally, remember to select a collection agency with a good reputation. Don't just shop for the best price. Remember- less reputable agencies can damage your own reputation as well as your wallet.
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Push to End Use of Private Debt Collectors by U.S

The national taxpayer advocate called on Congress today to repeal the authority it gave the Internal Revenue Service to use private debt collectors.

In her annual report, the taxpayer advocate, Nina E. Olson, said the private debt collection program was inefficient, uneconomical and prone to abuse. In particular, she faulted the I.R.S. for not disclosing certain “psychological techniques” used by the private firms when trying to collect unpaid taxes.

The office of the taxpayer advocate was created by Congress to identify problems within the I.R.S. that affect taxpayers and to promote taxpayers’ interests before the agency and before Congress, which writes the tax code.

Ms. Olson’s office provided its most extensive review yet of the private debt-collection program, which it has been monitoring for two years, since plans for it were announced.

The program, which formally began in September, is meant to farm out easily collectible tax bills, typically those owed by low-income taxpayers, to private collection agencies. When the I.R.S. announced the program, it said that the private agencies would abide by the same publicly disclosed rules as I.R.S. employees.

Private collection of tax debts has sparked criticism from opponents, who say that it costs the Treasury too much to supervise and that some of the private agencies use questionable business practices.

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US debt collection agencies find it pays better to call from India

Gurgaon: In a glass tower on the outskirts of New Delhi, dozens of young Indians are on the telephone, calling America’s out of work, forgetful and debt-stricken and asking for cash.
“Are you sure that’s all you can afford?” one operator in a row of cubicles asks politely. “Well, how do you take care of your everyday expenses?” presses another.

Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the American economy slows and its consumers struggle to pay for their purchases.

Armed with a sophisticated automated system that dials tens of thousands of Americans every hour, and puts confidential information such as social security numbers, addresses and credit history at operators’ fingertips, this new breed of collectors is chasing down late car payments, overdue credit card debt and lapsed instalment loans. Debt collectors in India often cost about one-quarter the price of their American counterparts, and are often better at the job, debt collection company executives say.

“India will be the only place we grow this year,” said J. Brandon Black, the chief executive of the Encore Capital Group Inc., a debt collection company based in San Diego. India is the company’s largest operating area, with about half the company’s collection force of more than 300.
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Mexico's Recovery: Is It in Peril?

LEAD: On the eve of a landmark loan agreement to ease Mexico's debt burden, economists and business executives here warn that the nation's fragile economic recovery is threatened by Government spending on new social programs and a scarcity of private investment funds needed for sustained growth.

On the eve of a landmark loan agreement to ease Mexico's debt burden, economists and business executives here warn that the nation's fragile economic recovery is threatened by Government spending on new social programs and a scarcity of private investment funds needed for sustained growth.

A slowdown in growth, they add, could well give Mexico trouble in meeting even its reduced debt obligations, raising the prospect that it would eventually have to go back to the banks to negotiate for new repayment terms once again.

The significance of Mexico's struggle to avoid further repayment difficulties extends well beyond the country's borders. The Mexican economy is the first testing ground for Treasury Secretary Nicholas F. Brady's plan to manage the $400 billion Latin American debt problem. With President Carlos Salinas de Gortari scheduled to sign the debt accord with Mexico's foreign lenders here on Sunday morning, the crucial Mexican test will begin in earnest.

Mexico and its 450 bank lenders agreed in principle to a debt-reduction package last July, and the announcement provided an important foreign vote of confidence in the Salinas Government's free-market program to curb inflation and put more of the economy in private hands.

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Market Place; Debt Still Threatens to Prevent Airlines' Recovery from Taking Off.

THE oft-recited bullish formula for airline stocks typically points out that many carriers are cutting costs by means like grounding planes and shedding unprofitable routes. With a little boost from the economy and a break from heavy fare wars, this lean approach should translate into quick profits.

Or so the argument goes.

Yet there is one nettlesome issue, apart from the unpredictability of the economy and airline pricing, that threatens to weigh on the industry's much-anticipated recovery: the debt carried off the airlines' balance sheets, covering leases for things like airplanes and buildings, a common practice in the industry. In some cases, this debt is more than twice the debt on their balance sheets.

That additional debt points up the daunting challenge many airlines face in regaining investment-grade status, which would help them drive down their stubbornly high costs.

"Earlier this year, the market seemed to think that any kind of earnings recovery would put the airlines on a path to much healthier financial condition," said Philip Baggaley, a transportation analyst at the Standard & Poor's Corporation. "But it is a much longer road back than they may realize."

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Finding Potential for Debt in Distress

THE credit crisis and economic slowdown have sunk billions of dollars of debt into distressed status — deep in the junk-bond pile. Money managers have traditionally profited in such markets by buying debt on the cheap.

Individual investors can get into the game indirectly, through a small number of mutual funds, including BlackRock High Yield, Mutual Recovery and Northeast Investors Trust, which hold some distressed debt.

“Right now, we think there is going to be tremendous opportunity over the next 12 to 18 months,” said James Keenan, manager of BlackRock High Yield, which has returned 0.41 percent in 2008 and 7.15 percent, annualized, over the last three years, according to Morningstar. (All figures are through Thursday.)

Mr. Keenan foresees raising the fund’s current investment in distressed debt to 10 to 15 percent of assets, from the current 2 to 3 percent, as opportunities arise.

Distressed debt is often defined as the obligations of companies in default or perilously close to it. The term may also be used for debt paying a very high yield — 10 percentage points more than 10-year Treasuries.

Investing in such debt is risky, but handsome profits can be made by converting it into equity ownership as restructured companies leave bankruptcy.

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Debt-Collection Bill Could Reduce Deficit

Serious concerns are raised in your Feb. 23 front-page article on the Federal Government's mushrooming loan liabilities and the shortage of workers to oversee the loans.

In 1995, I conducted a study that showed that a small percentage of individuals, businesses and organizations owe the Government about $55 billion in delinquent nontax receivables. From 1994 to 1995, when cumulative delinquent debt rose 15 percent, nontax debt collections decreased by 14.5 percent.

Examples of nontax debt include farm loans, defaulted housing loans and oil pollution cost fees. Many delinquent debtors are able to pay but do not because of lax collection efforts.

The report disclosed a hodgepodge of collection methods and procedures that hinder the Government's ability to collect or to make good loans.

I have worked with the Treasury Department and the Republican chairman of the subcommittee on government reform, Stephen Horn, to draft legislation that would enhance debt collection efforts by helping agencies share information, standardize and centralize debt-management functions within the Treasury Department and strengthen debt-collection regulations.

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Debt Collection Done From India Appeals to U.S. Agencies

GURGAON, India — In a glass tower on the outskirts of New Delhi, dozens of young Indians are on the telephone, calling America’s out of work, forgetful and debt-stricken and asking for cash.

The Encore Capital Group, a debt collection company based in San Diego, has pep talks for workers at its call center in India.

“Are you sure that’s all you can afford?” one operator in a row of cubicles asks politely. “Well, how do you take care of your everyday expenses?” presses another.

Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the American economy slows and its consumers struggle to pay for their purchases.

Armed with a sophisticated automated system that dials tens of thousands of Americans every hour, and puts confidential information like Social Security numbers, addresses and credit history at operators’ fingertips, this new breed of collectors is chasing down late car payments, overdue credit card debt and lapsed installment loans. Debt collectors in India often cost about one-quarter the price of their American counterparts, and are often better at the job, debt collection company executives say.

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I.R.S. Use of Private Debt Collectors Is Criticized

The national taxpayer advocate called on Congress yesterday to repeal the authority of the Internal Revenue Service to use private debt collectors.

In her annual report, the taxpayer advocate, Nina E. Olson, said the private debt collection program was economically inefficient and prone to abuse. In particular, she faulted the I.R.S. for not disclosing certain “psychological techniques” used by the private contractors to try to collect unpaid taxes.

The office of the taxpayer advocate was created by Congress to identify problems within the I.R.S. that affect taxpayers and to promote their interests before the agency and Congress, which writes the tax code.

Ms. Olson’s office provided its most extensive review yet of the private debt-collection program, which it has been monitoring for two years since plans for it were announced. The program, which formally started in September, is meant to farm out easily collectible tax bills, typically owed by low-income taxpayers, to private collection agencies. When the I.R.S. announced the program, it said that the private entities would abide by the same publicly disclosed rules as I.R.S. employees.

Private debt collection has drawn criticism that it is not cost-efficient and that some of the private firms hired by the I.R.S. have questionable business practices. One firm hired by the agency was the law firm of Linebarger Goggan Blair & Sampson of Austin, Tex., whose former partner, Juan Peña, pleaded guilty to federal bribery charges for his role in winning a collection contract from the city of San Antonio.

The taxpayer advocate also criticized some of the techniques used by private collectors. “In an initial draft of this report, we cited sections of a collection script used by one of the contractors which used psychological tricks during the conversation to get the taxpayers to commit to a payment, which is then followed by a belated Fair Debt Collection Practices Act warning at the end of the conversation,” the report says.

“The I.R.S. informed us that private collection agencies had designated the ‘collection scripts’ and operational plans as proprietary and that we could not cite specific portions of the scripts.”

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Debt Collection Agencies Under Scrutiny at Hearing

Joan Baron was certain that her husband, a surgeon who suffered a debilitating stroke in February 2004, never ordered a telephone-directory advertisement from Verizon. When she received a bill for such a service, she disputed it.

"Verizon ignored my letters and continued billing," Ms. Baron wrote in a recent letter to the city.

According to Mrs. Baron, who is 75 and lives on the Upper West Side, Verizon hired a succession of four debt-collection agencies. All of them sent her dunning letters, from September 2004 to April 2006, even though she responded each time with letters insisting that the debt was not legitimate. Finally, the city agreed to intercede on her behalf.

Complaints to the city about such practices have risen 70 percent over the past two years, and yesterday the city's Department of Consumer Affairs, which licenses and oversees debt collection agencies, detailed the extent of the growing problem during a public hearing.

Increasingly, the officials said, collection agencies are resorting to illegal practices like making frequent and harassing phone calls, disregarding letters from consumers disputing the validity of debts, and passing on difficult cases to new collection agencies without first trying to resolve the disputes.

The problems have been aggravated by identity fraud; paperless transactions, which make debts and payments harder to document; and easy access to credit, which has helped fuel borrowing and discourage saving.

"People ought to pay their debts," Jonathan B. Mintz, the city commissioner of consumer affairs, said during a break in the five-hour hearing. "But when debt-collection companies cross the line, which unfortunately they appear to be doing in an increasing way, then something has to change."

American consumers have protections under the federal Fair Debt Collection Practices Act of 1977, which the Federal Trade Commission enforces, but states and cities may adopt stronger protections for their residents. In New York State, the attorney general's office oversees the industry, and companies seeking to collect debts from New York City residents must obtain a license from the Department of Consumer Affairs. There are 878 such companies with city licenses.

Yesterday, Mr. Mintz and two of his aides, Andrew Eiler and Marla Tepper, heard from city residents and consumer advocates, and then industry representatives who had been subpoenaed to testify at the hearing at Borough of Manhattan Community College. Although the hearing was only to gather information, Mr. Mintz said the department would consider proposing tighter regulations if necessary.

Karen Gross, a professor at New York Law School and the president of the Coalition for Consumer Bankruptcy Debtor Education, which promotes financial literacy, said many consumers were often asked to pay debts and related credit-card fees for expenses they did not incur, because of identity theft or shoddy information.

The frequent buying and selling of debt, she said, means that the collecting agency is often far removed from the original creditor.

Karuna B. Patel, a lawyer at MFY Legal Services, a nonprofit group that helps elderly Manhattan residents among others, said a mentally disabled client's bank account was frozen in September because of a judgment obtained by a debt collector, even though his income — $666 a month from Supplemental Security Income — was protected by law from seizure for debt repayment. She said that $435 was taken from his account, which left him struggling to pay for food.

Mark E. Davitt, president of ACA International, a trade group for collection agencies, said the debt-collection industry recovered $39 billion last year and returned it to the United States economy, saving the typical household $351. He said his members not only obeyed all government regulations, but also followed a code of ethics adopted by the association.

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CONSUMER SATURDAY; COLLECTION AGENCIES AND RIGHTS

LEAD: RACHELLE CAGNER opened her mail last Sept. 26 and found a letter from the Corporate Accounting Office of the Disbursement Center. In exchange for ''confirmation'' of her Social Security number, date of birth, telephone number and address, the letter said the office would forward ''a check'' for ''funds on deposit'' in her name.

RACHELLE CAGNER opened her mail last Sept. 26 and found a letter from the Corporate Accounting Office of the Disbursement Center. In exchange for ''confirmation'' of her Social Security number, date of birth, telephone number and address, the letter said the office would forward ''a check'' for ''funds on deposit'' in her name.

To most people, that might sound like a pretty good offer. Ms. Cagner thought so. If the Disbursement Center wants to disburse some funds, far be it from her to get in the way, she thought. But then she remembered that the New York State Comptroller's office once tracked down a friend to give him some undisbursed funds and no one ever asked him to confirm his Social Security number.

When she took a second look at the letter she saw there was no Social Security number to confirm, let alone anything else to confirm, just empty blanks to fill in.

''That's what tipped me off,'' she said. ''If someone has money for you they will have your Social Security number and ask you if it's the right one. They were trying to take me for a fool.''

The Disbursement Center is a collection agency and what it was trying to do, according to the New York State Attorney General's office, was collect information so that it could collect money. It got in touch with Ms. Cagner, and probably a number of other people with her name, because it was trying to track down a debtor named Cagner, according to Dennis Rosen, an assistant Attorney General in Buffalo.

Mr. Rosen said that the Disbursement Center, which has clients that include the Manufacturers Hanover Trust Company, the Chase Manhattan Bank and the Marine Midland Bank, has mailed more than 30,000 such letters since 1983 to people throughout the nation, telling them that if they write back the center will send them a check for untold amounts of unclaimed funds.

If they turn out to be the debtors in question, instead of a check they get dunned, he said, and if they turn out not to be the debtors, they either hear nothing again or receive a check for $1. Mr. Rosen said the company makes $600,000 to $900,000 a year from this business.

Mr. Rosen said the Disbursement Center and two other collection agencies, Locator Associates and Credit Bureau of Chautauqua County, in Dunkirk, N.Y., are owned by Ronald Merwin. Last week Attorney General Robert Abrams sued Mr. Merwin and his three collection agencies to stop them from mailing their letters.

The suit charges that the agencies have violated the Federal Fair Debt Collection Practices Act of 1978 and the provisions of New York State's General Business Law that bar collection agencies from deceiving people to collect from or locate debtors.

Mr. Merwin referred a reporter's inquiry about the mailings to his attorney, J. Joseph Wilder, who did not return the telephone call. A call to the Disbursement Center was answered with a recorded message, which identified the collection agency as a ''marketing and survey organization'' and urged callers to fill out their ''computer form'' and return it. ''A check and survey will soon follow,'' the tape said.

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Debt collection by agencies almost doubles

They write you letters. They call you at home and send text messages. Occasionally, they’ll even knock on your door. And they’re almost never, ever welcome.

They’re professional debt collectors, the agencies employed by a gamut of companies, from mobile phone telecoms to credit card providers, to track down delinquent customers and extract payment. It’s grueling, unpopular work — and it’s growing.

Last year the number of consumer debt collection cases passed to agencies almost doubled, according to recent survey results released by the Association of Collection Agencies (AIA), which represents the country’s largest debt collectors.

The past few years have seen a surge in consumer loans, which has led to a rapid increase in household debt. It’s then natural that, as debt increases, more people slip in their payments, said Radek Laštovička, the managing director of the collection firm Coface.“Simultaneously, the providers of these loans … have developed more efficient collection procedures, which more often include outsourcing collection to specialized agencies,” he said.

Collection agencies are a relatively new phenomenon in the country and the practices they use can sometimes traipse the limits of legality, according to Michal Kebort, a financial specialist from the Czech Consumers Defense Association.“They’re usually very successful in moving on the border of the law and good morals,” he said. “

We’ve found no occurrence of explicitly unlawful procedures. Mostly they use questionable procedures.“What’s on the verge of acceptability is that debtors’ relatives or close friends are frequently contacted [by the agency].

Here I would ask where the agency got this information and whether the Act on Personal Data Protection has been breached.”Once debts are in the hands of an agency, the first step is to seek an out-of-court settlement, said Arne Kejdana, spokesman for Profi Credit.“

We try to get in touch with the debtor.

We make calls, send letters and try to propose some kind of agreement,” he said.Coface begins with mail and phone reminders and then will sometimes add SMS reminders, Laštovička said, adding that “personal visits are used to verify the contact address and, sometimes, to personally deliver written reminders.”The prime sources for debt cases passed to collection agencies are non banking personal loan providers, banks issuing credit cards, telecoms and utilities, according to Coface.

Most debt cases stem from administrative issues or short-term cash problems and can be solved simply through regular communication. Every so often, however, you will find that “some debtors are notorious liars and [our staff] should be able to recognize that,” Laštovička said.

Debts to grow

Even with last year’s increase, the number of collection cases remains low compared with Western Europe, largely because household debt has room to increase further. “Household debt is still far below West European standards,” Laštovička said.

“We’re probably just at the start of the expansion of the consumer debt collection industry in the Czech Republic.”

The ratio of Czech household debt to gross domestic product increased by seven percentage points to 29 percent in 2007, according to the Czech National Bank (ČNB). However, this is well below the ratio in the eurozone, which is 61 percent. By the end of March, household debt totaled 756.14 billion Kč ($47.4 billion), an amount that could well top 900 billion Kč by year’s end, according to GE Money Bank.

While growth in mortgages, which constitute a significant portion of household debt, slowed in the first few months of this year, consumer loans accelerated in the first quarter, according to the ČNB.

Some banks reported double-digit increases in demand for these loans, which are more likely to eventually end up in the hands of collection agencies.
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