It’s common knowledge that many small businesses operate on tiny profit margins. Of course, part of that stems from the epidemic of unpaid invoices. The total estimated amount of unpaid debt to small businesses in the US alone exceeds $800 billion. With that kind of outstanding debt on the books, it’s not really surprising that small businesses struggle to make ends meet. All is not lost, however. Small businesses can turn to a collections agency to try to recoup some of that money.
If you’re looking to get some of the owed money but haven’t worked with collection agencies before, keep reading. We’ll cover ten things you should know about working with a commercial collections agency in Birmingham.
1. Collection Agencies Often Specialize
Most collection agencies specialize in some way. Some agencies only work with specific industries. Others will only take on certain kinds of debt.
For example, some collection agencies put a bottom limit on the debts they’ll pursue. Any debt below that amount and they won’t handle it.
Some agencies will only deal with debts from within a certain timeframe. Statistically, the older a debt gets, the less likely recovery becomes. So an agency may limit themselves to debts from the last two or three years.
2. Agencies Can’t Misrepresent Themselves
No reputable collection agency will present itself as anything other than a collection agency. For example, the customer service rep won’t pretend they represent law enforcement. Doing so would jeopardize the collection agency and reduce the odds of collecting on your past due debts.
Agencies also won’t pretend they represent credit bureaus or tax agencies.
3. Will Send Letters
Agencies will send letters to the people who owe you money. The letter typically lays out the exact nature of the debt, as well as what business the debt originates with and the original date of the debt.
These letters establish that the debt is, in fact, a real debt. They also serve as a notification that you’ve sent the debt into collections.
4. Calls Are Common
Until the agency reaches an agreement for repayment with your debtor, we will attempt to call them. These calls serve much the same function as the letters.
They lay out the nature of the debt and provide options for repayment. They also provide an option for the debtor to make an alternative suggestion for repayment.
The FTC limits when debt collectors can call in collections to between 8 a.m. and 9 p.m. Reputable collections agencies follow these rules. It keeps the agency on the right side of the FTC and limits claims of harassment.
Agencies will limit the number of times they call per day to avoid the reality or perception of harassment.
5. Agencies May Negotiate
Many businesses prefer the prospect of getting some money from their unpaid invoices over getting no money from them. If you feel that way, you can empower the agency to negotiate with people for partial payments.
In most cases, the agency will aim at collecting a fixed percentage of the debt. You must discuss with the agency what you consider sufficient payment. That lets the agency formulate partial settlement options.
6. Agencies Will Not Threaten
Collection agencies cannot threaten debtors with, for example, arrest for non-payment. No collection agency in the country can make an arrest warrant appear, so it’s a hollow threat. Owing consumer debts also isn’t something that the court system deems as jail-worthy.
Issuing such threats, however, does violate the rules set out by the FTC and could prompt a serious response. The most an agency can do is apply pressure to pay through calls, letters, emails, or text messages.
7. Agencies Don’t Visit Debtors in Person
Agencies also do not visit people in person at their jobs. Such visits are, by their very nature, threatening. It also makes the debt public.
Making a person’s debt public is strictly forbidden by the rules under which collection agencies operate. In fact, the collection agency can’t put information on an envelope that might reveal the debt. Even that much publicity would violate the rules protecting the debtor’s privacy.
8. Agencies May Report the Debt
Most agencies will report the debt to the credit bureaus. The outstanding debt can damage someone’s credit score. It also serves as another kind of pressure to resolve the debt.
Good agencies will also report payments on the debt to help fix the damage done by reporting the debt in the first place.
9. An Agency May Take Legal Action
Depending on the agency and the debt, some agencies will initiate legal actions against someone who owes a debt. These are civil lawsuits that can result in a judgment against the debtor.
Most agencies treat legal action as the last resort. Even with a judgment, actually collecting any money can prove extremely difficult.
You should discuss whether or not you want a lawsuit as part of the collection process with the agency. Some business owners would rather sell off the debt for a percentage than mess around with going to court.
10. The Agency Gets a Cut
Most agencies operate on contingency, so to speak. They don’t get paid unless the debtor enters into an agreement and settles the debt or starts making payments.
When the debtor clears the debt or makes payments, the agency gets a fixed percentage of the recovered debt. The exact percentage varies by agency, and you should discuss that percentage before entering into an agreement with a collection agency.
Working with a Collections Agency
Many businesses hesitate over the prospect of working with a collections agency. The business owner worries that sending a customer into collections will destroy the relationship and not resolve the debt.
While collection agencies have policies in place about when and how they contact debtors, good agencies will take your concerns into account. Some will customize their approach to limit the fallout with customers you’d rather keep as customers.
FFCC specializes in taking the customer relationship preservation approach. For more information or to get started as a client, contact FFCC today.
First Federal Credit Control
24700 Chagrin Blvd #205
Beachwood, OH 44122
(216) 360-2000
(800) 486-5500
https://ffcc.com/
