Many companies procrastinate hiring a collection agency because they simply don’t know what they don’t know about the credit and collections industry. Consequently, businesses often struggle to formulate a list of specific questions before hiring a collection agency. This uncertainly may lead to delay — a major factor in poor debt recovery — and consequently, even greater outstanding balances. Statistics prove that the early bird gets the worm in debt collections.

Realistically, debt recovery is an essential component of widespread business solvency, keeping workers employed, and paying income taxes to fund government services. Also, the credit and collection industry is heavily monitored by government regulators who are mandated to protecting consumer interests. Today’s best-in-class agencies are fully compliant with relevant laws and committed to providing clients with a favorable return on investment, brand protection and customer retention.

What to ask before hiring a collection agency?

This two-part series covers 12 essential areas that businesses should query before hiring a collection agency (part two will cover questions 7 – 12).

How much experience does the agency have?
Can the agency collect in all 50 states?
Does the agency have a compliance management system?
Which certifications does the agency have?
Does the agency have receivables management technology?
What type of reports does the agency furnish to clients?
What is the agency’s commission rate?
What is the agency’s rate of recovery?
Does the agency safely transfer, process and store consumer data?
Can the agency implement a national client, and if so, can it be done quickly?
Will our indebted customers be treated with respect?
Which department at the agency will protect my interest?

A fully transparent agency should be willing to address each of these areas to the satisfaction of prospective clients. With these answers in hand, a business will have the necessary background to make an informed decision about hiring a collection agency or agencies.

1. How much experience does the agency have?

This first item has two parts: experience in collections and experience within the industry or vertical of the prospective client.

Prospective clients should look for agencies with executive and senior management having 15 or more years of experience in debt recovery and or financial services. The learning curve is huge. Today’s agency leaders are expected to remain current on economic and consumer trends, compliance, certification, collections technology and data security.

In addition to those factors, individuals running collection operations should be fully fluent in collections and dialer technologies, metrics and KPIs, predictive analytics, documentation, reports, scoring, segmentation and training.

Industry experience is essential in sectors having consumers with specific needs and or regulatory protection. One example is healthcare where a consumer’s well-being might be at stake if the collections process is not handled with finesse. Another is energy-utilities where laws protect individuals from having their services cut during specific seasons (i.e. fuel in winter or electricity for air conditioning in summer).

On the other hand, some industries such as retail and payment cards have overlapping parameters and dynamics. In this instances, parallel collection strategies may be leveraged to recover a substantial amount of debt.

Before hiring a collection agency, clients should look for firms that design industry-specific collection strategies. Agencies should also stay abreast with the latest trends in each industry to ensure full compliance with collection laws and abate lost collection efforts.

2. Can the agency collect in all 50 states?

With indebted consumers living everywhere in the country, it’s best to hire agencies that are licensed and bonded in all 50 states. These two factors are inter-related because about 30 states require agencies to carry surety bonds to ensure compliance with their regulations before issuing collection licenses.

Bonds guaranty the fulfillment of legal obligations associated with the collection of debt. Such responsibilities usually relate to the proper handling of personal data or the collection of funds on behalf of clients. If, for example, an agency fails to properly rout all collected funds or mishandles the data, then the respective state could file a claim against the agency.

3. Does the agency have a compliance management system?

Best-in-class agencies maintain compliance management systems (CMS) to conform with all relevant federal and state laws. The agency’s CMS should include internal management audits, compliance and training programs (and related tracking and documentation), vendor management policies, data security policies, payment processing procedures, complaint and dispute resolution policies, record retention guidelines and more.

Compliance is maintained by certified Credit and Collection Compliance Officers from ACA International as well as collectors and a legal team that often have proportionate certifications.

These agencies rely on stand-alone quality assurance departments to monitor collector calls using systematic scoring and grading to assess the compliance of individual, team and agency efforts. QA departments also providing moral and legal compass to agency policies and procedures.

4. Which certifications does the agency have?

Before hiring a collection agency, prospective clients should also query them about specific certifications. For example, PCI DSS certification protects the payment card information of consumers, SOC 1 Type II certification audits the controls affecting clients’ financial statements, and SOC 2 Type II assesses the controls related to non-financial reporting.

The most comprehensive certification in the credit and collections industry, Professional Practices Management System (PPMS) by ACA International, covers the 18 essential components of running a best-in-class agency. PPMS is the benchmark for implementing a successful management framework and enacting a commitment to improving policies, procedures, training and operations on a continuous basis. Less than 1.5 percent of debt collection agencies in the U.S. have earned this distinction.

5. Does the agency have receivables management technology?

Modern debt collection agencies use customizable receivables management (RM) software to create and maintain workflow designs and automation for any number of accounts. The successful management of these programs helps identify and prioritize accounts with a greater tendency to pay.

The compliance components integrated into RM software packages cover relevant laws pertaining to collections such as HIPAA, GLBA, FCRA, FDCPA, SCRA and TCPA. The platforms also optimize business-rule automations by managing how and when to make compliant contact with consumers.

The technology may include hosted dialer technologies, skip tracing and interactive voice response technology (IVR) to deliver favorable results. Features include options for manual, power and predictive dialing collection strategies; answering machine detection; integrated cell phone consent and scrubbing capabilities; collector conversation management for “whisper, monitor, barge-in and commandeer” modes; and more.

6. What type of reports does the agency furnish to clients?

In order to maintain transparency, agencies run a variety of standard and customized reports, then furnish them to clients according to pre-arranged schedules.

Standard reports may document information about bankruptcies, call and letter campaign logs, compliance, consumer payments, internal and external audits and other parameters.

Numerous reports address the efficiency of agency operations: individual, team and bucket scoring; right-party contacts; dialer efficiency; and conversion rates as well as day-to-day, week-to-week, month-to-month and year-to-year collections.

Reports can be customized and delivered in any frequency desired by clients.

Summary

Collections is an industry predicted on detailed planning, preparation, training, protocol and procedure. For these reasons, most top-tiered agencies maintain legal departments that are well versed in all aspects of debt collector law including consumer protection and privacy, litigation, contracts, and federal rules and regulations.

The synchronization of factors such as operations, compliance, technology, experience and certification enables agencies to provide clients with a favorable return on investment, brand protection and customer retention. These factors should be considered individually and as an ensemble before hiring a collection agency.

Contact Optio Solutions today to request a proposal or simply to inquire about an individualized collection strategy for your organization.

About the author

Joe Gargiulo

Marketing and Communications Mgr. Joe Gargiulo has 25-plus years in copy writing, marketing and public relations. As a writer, he enjoys connecting story leads to all aspects of the human experience.