ACA International estimates that there are 4,190 debt collection agencies in the U.S. as of November 2017. Ranging in size, specialties and resources, selecting the right debt collection agency can prove to be a daunting task. Companies signed with one or more agencies recognize the value of top performers along with the costs of hiring under-performers. Businesses interested in hiring additional agencies may review our three-part series for essential considerations.
Part 1 details affiliation, compliance, certification, data security and technology. Part 2 discusses quantitative and qualitative features. In our upcoming part 3 article, we will examine performance and transparency.
Quantitative Analysis
Scrubs
There may be potential issues when handling collection accounts for consumers who are deceased, currently involved in a bankruptcy, have prior litigations related to the Fair Debt Collection Practices Act (FDCPA), or are under protections by the Servicemembers Civil Relief Act (SCRA). A best-in-class debt collection agency performs daily scrubs with state-of-the-art technology on all accounts to verify the status and background of each consumer. At some agencies, accounts linked to the circumstances listed above will immediately be removed from the company’s database. Following a scrub, acceptable accounts are placed in collections and assigned to the most suitable collection strategy based on individual account information and client needs.
Skip Tracing
Skip tracing is the process of locating indebted consumers whose contact information — phone number and address — is no longer accurate. Collection agencies utilize specialized skip tracing software to search through public and private databases. Companies may purchase this information or employ an agency with top-level skip tracing abilities.
Skip tracing remains an important component of debt collection.
Strategic Predictive Analytics
A step above the expert method — where collection agencies rely on management’s experience and basic account information to organize and assign delinquent accounts — traditional predictive analytics “brings together advanced analytics capabilities spanning ad-hoc statistical analysis, predictive modeling, data mining, text analytics, optimization, real-time scoring and machine learning,” states IBM.
The latest model, strategic predictive analytics, has proven more efficient and cost effective than traditional predictive analytics.
In addition to traditional analysis, this evolved approach uses cost-benefit analysis, simulations to determine break-even points and collection scoring models and risk scores. Management compares various segmentation options to pinpoint when collection strategies are no longer profitable for individual accounts. This allows collection agencies to direct efforts toward the correct debtors at the right time using the most effective communication strategies for the greatest return on investment (ROI).
Document All Interactions
Finally, a thorough documentation of all interactions with clients and consumers, from phone calls to email correspondence, is crucial. Access to such records allows agencies to collect effectively and more efficiently. Furthermore, the ability to produce accurate documentation may help companies pursuing legal collection against delinquent consumers.
Qualitative Analysis
Agency Experience
In the 2017 report The Impact of Third-Party Debt Collection on the US National and State Economies in 2016, ACA International found that third-party debt collectors returned nearly $67.6 billion to creditors in 2016. From upper-level management to debt collectors, agencies that employ seasoned collection professionals produce optimal results. Companies would be well served by choosing agencies with highly experienced teams.
Experience in Specific Industry
Each agency holds a unique set of expertise and resources. Whether an agency is dedicated to one market or serves a number of industries, companies can choose an agency with proven success in relevant industries. Companies may identify which firms possess the highest level of industry understanding by discussing individual needs and goals prior to hiring.
A best-in-class agency expertly serves clients with industry-specific strategies that satisfy individual company needs. Remaining current on the latest industry trends and ensuring full compliance with collection laws also increases an agency’s performance. Agencies should also have a firm grasp of industry jargon, operations and concerns.
Businesses can gain further insight into an agency’s performance by referring to client testimonials.
Leadership Experience
Debt collection teams and agencies as a whole perform best when under the direction of exceptional leadership. Relevant experience in the debt collection management role should be paired with sound decision-making skills, clear communication, a quick response time, proficient problem-solving skills, a drive for self-improvement and responsibility. It is also essential for leaders to effectively optimize collection software and oversee all telephone communications.
Consumer and Commercial Debt
Both consumer and commercial debt can cause substantial financial harm to a creditor’s business. Many debt collection agencies specialize in collecting either consumer or commercial debt, while some possess the expertise to collect on both.
Consumer debt — debt owed by an individual consumer —typically arises from sources such as personal credit cards; retail credit cards; unpaid medical and dental bills; student loans and education; unpaid mortgages or loan balances; overdue energy, utilities and telecommunications bills; remaining veterinary fees; and auto loans and auto-related expenses.
In addition to state laws, key federal regulations that relate to consumer debt collection include the Fair Debt Collection Practices Act (FDCPA), the Health Insurance Portability and Accountability Act (HIPAA), the Fair Credit Reporting Act (FCRA), the Telephone Consumer Protection Act (TCPA) and the Servicemembers Civil Relief Act (SCRA). The legislation prohibits invasive and aggressive collection methods — deception, harassment, threats, etc.
Commercial debt refers to business-to-business debt. Debts can occur from unpaid products and or services provided by one business to another along with debt from insurance, utilities, communications and vehicle loans. Federal regulations do not generally apply to commercial debt recovery, allowing for unethical collection tactics. However, commercial debt may be regulated by each state differently. Businesses in need of commercial debt collection should sign with an agency who collects legally and professionally to safeguard against legal issues and a negative brand image.
Top Debt Collection Agency Mission, Vision and Values
Alongside qualifications and experience, the right debt collection agency upholds a mission, vision and values focused on maintaining the highest standards of performance. One with a vision to provide superior services that meets the unique needs of individual clients.
Consequently, it is recommended that businesses choose a debt collection agency with a solid mission, including those that:
- Achieve unparalleled customer satisfaction
- Nurture a culture of continuous improvement
- Foster an entrepreneurial spirit
- Treat customers, consumers and associates with respect at all times
Preferred agencies are founded on essential values such as commitment, leadership, teamwork, accountability, respect and philanthropy. These standards guide agencies to conduct collections successfully, legally, efficiently and professionally.
Further Considerations About Debt Collection Agencies
Businesses looking to add one or more debt collection agencies may consider a variety of factors including quantitative and qualitative attributes.
Optio Solutions is a best-in-class debt collection agency that skillfully serves a broad spectrum of industries — financial services, education and student loans, healthcare, retail, energy and utilities, telecommunications, automotive, commercial collections and insurance — with effective first-party and third-party collections strategies, advanced technologies, and industry expertise. Finally, Optio is committed to delivering the highest level of client satisfaction that includes a favorable return on investment, brand protection and customer retention.
For additional reading, download our free guide about “How to Add a Debt Collection Agency.”
