In 2016, a debt collection agency report by ACA International stated that nearly $67.6 billion was returned to creditors. For companies with delinquent consumer accounts, choosing one or more high performing agencies can play a crucial role in businesses success. Business owners seeking to add an agency can evaluate each company by nine key components — affiliation, certification, compliance, security, performance, quantitative analysis, technology and transparency.
Establishing and maintaining a favorable brand image is crucial to most companies. A single oversight or dissatisfied customer due to internal oversight, negligence or poor communication can significantly harm a company’s image. Businesses performing internal debt collections without state-of-the-art technologies, resources and industry expertise risk compliance violations and a negative brand association. For companies using external sources, errors in an agency performance can lead to consumers filing complaints with the Bureau of Consumer Financial Protection (BCFP) and the Better Business Bureau (BBB), negative reviews and comments on company social media channels, negative press coverage, and loss of customers and revenue.
Top agencies maintain an unwavering dedication to responsible and professional collections. In order to safeguard clients against a negative brand image and media coverage, agencies use a multi-level approach to brand protection focused on the consumer’s experience. An effective approach will implement a strict adherence to all state and federal debt collection laws, maintain a legal team, employ ACA Certified Credit and Collection Compliance Officers, use leading technologies (see part 1), and conduct consumer satisfaction surveys. Consumer satisfaction surveys are designed to improve service levels and brand protection by asking consumers a series of questions regarding agency and collector performance. Information collected allows agencies to improve the consumer experience and increase collection results. Selecting best-in-class collection agencies can help ensure positive consumer experiences and a successful future.
Flat Fees and Contingency Fees
Third-party agencies offer multiple types of fee structures, including flat fee, pay-as-used, contingency and per full-time employees (FTE).
Flat-fee and pay-as-used agreements are usually used for the purchase of a letter series (strategy one) or a combination of third-party phone calls (strategy two) and a letter series. Clients pay a pre-arranged amount per account and in most cases, consumers are instructed to pay all moneys directly to the client.
The contingency fee payment model is most commonly used by agencies that collect by phone. In this model, agencies collect funds and remit a pre-arranged percentage to the client on a daily, weekly or monthly basis. On average, fees may range from 25 – 50 percent of the total amount of debt collected per account.
Per FTE fees are also available at some agencies. This allows clients to budget a specific amount per month while ensuring they receive 100 percent of all collected funds.
Businesses can refer to client testimonials to gain further insight into an agency’s performance.
In addition to information presented on an agency’s website, client testimonials provide further detail on how an agency individualizes its services to produce desired results. Businesses will find a list of testimonials on the website of a high performing agency.
Businesses should also request refernces because some agency clients may not want their corporate names appearing on testimonials web pages.
Agency Score Cards and Collector Score Cards
Businesses partnering with more than one debt collection agency should fully analyze agency score cards. The performance measurement tool allows businesses to help identify whether or not an agency is producing favorable results in order to make adjustments to strategy suggestions or contracts — altering the number of accounts managed, collection strategies used, or ending a contract — if needed.
Agency score cards compare key statistics that vary depending upon individual needs and concerns. Categories may include revenue collected, customer service and responsiveness. Businesses that employ one or more agencies can use the score cards to compare companies and assess individual performance. Companies can easily identify areas in which an agency may be underperforming and make adjustments to contracts as needed.
It is important to work with agencies that use internal score cards to monitor the performance of their collectors.
A collector score card is a “summary of a wide variety of collector statistics in a single easy-to-read document,” insideARM states. The report measures individual collector activity over a specific period of time, usually a week and or a month. Each category has a set value, with a final grade at the bottom of the document. Data from previous and current scorecards is routinely analyzed to determine future actions and remain relevant within the industry while newly implemented strategies are monitored daily and adjusted if needed.
At top debt collection agencies, management produces and analyzes collector score cards on a weekly and monthly basis. Management will conduct tailored coaching with collectors if necessary.
Effective collection agencies produce regular reports which are delivered via secure file transfer protocol (FTP) for clients. When necessary, clients can easily share online documents internally. While each agency provides a unique set of reports, common reports include:
- The report of accounts and balances received
- Monthly status reports
- Standard summary reports
- Detailed reports on individual accounts
- Demographic reports
Regularly produced reports provide transparency between clients and agencies. Businesses can utilize the assessment tool to determine an agency’s performance and make contract adjustments as needed.
Availability of Audited Reports
Internal auditing is the process of reviewing and reporting on a debt collection agency’s internal operations. Agencies use audit results to maintain data security and satisfactory collection rates, and identify present and potential risks in order to minimize those risks. Agencies that support transparent partnerships will provide audit reports to clients upon request.
Generally, internal audit programs focus on an organization’s financial statements and accounting efficiency. InsideARM explains that the “foundation of the financial audit is usually to ensure that all money collected by the agency is remitted.” To ensure compliance with state, federal and agency regulations, a thorough evaluation of an agency’s financial practices will consider factors such as the security of client and consumer information; the payment verification process; and the efficiency of phone, credit card and cash payments.
Best-in-class agencies are certified with SOC I Type II (financial) and SOC 2 Type II (non-financial) reports that are conducted by licensed CPA firms.
Designated Client Relations Representatives
In order to offer direct and proactive service to clients, successful agencies operate with a dedicated client relations department. Department representatives must remain committed to delivering the highest levels of quality service while remaining compliant with all laws and internal protocols. Client relations representatives should be thoroughly trained and possess exceptional skills in customer service, telephone and verbal communication, computer literacy and administrative tasks.
Client relations departments should use a one-person contact system for ease of communication. Assisting specific clients allows representatives to better assist businesses by possessing detailed knowledge of each client’s situation, needs and goals.
Discussion of Collections Strategy
Businesses would be well-served to select a debt collection agency that thoroughly describes its collection strategies and services. A detailed breakdown of each service should be easily accessible on an agency’s website. In addition, agencies should offer complimentary consultations that allow prospective clients to review all questions and concerns with a representative.
One size does not fit all in the realm of a debt collection agency. Quality agencies understand that each client requires an individualized plan to meet specific needs and goals. Prior to signing a contract agreement, businesses can discuss collection methods and select the most suitable approach for its situation. Contract agreements should explicitly state all of the ways in which debt collection agencies will service the business including collection methods used, legal responsibilities, reporting obligations, pricing, billing and cancellation options.
Evaluating a Debt Collection Agency
Employing the right debt collection agency can help businesses maintain positive consumer relationships while producing favorable collection results. When looking to add one or more agencies, businesses may download our free guide about “How to Find the Best Debt Collection Agency.”