Hiring a good collection agency to manage overdue accounts can significantly impact a business’s cash flow and financial health. However, choosing the wrong agency can lead to a host of issues, ranging from ineffective debt recovery to legal complications.
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Here’s a deeper look into the potential red flags that might indicate you’ve hired the wrong collection agency:
No Online Secure Portal
The absence of an online secure portal indicates a lack of modern, secure methods for clients to manage their accounts, view progress, or communicate with the agency. This can hinder transparency and efficiency.
Unreachable Customer Support
An agency with unreachable customer support is a significant red flag, indicating potential issues with responsiveness and reliability. This can lead to frustration, lack of updates on the collection process, and difficulties in resolving disputes or obtaining answers to questions.
Not GLBA Compliant
Non-compliance with the Gramm-Leach-Bliley Act (GLBA) suggests that the agency does not adhere to the required standards for protecting consumers’ personal financial information, posing a risk to privacy and security. All collection agencies are required to be GLBA compliant by law.
Not Licensed in All 50 States
If the agency is not licensed to operate in all 50 states, it may not be able to pursue debtors across state lines legally, limiting the scope and effectiveness of its collection efforts.
No Performance Guarantee
The lack of a performance guarantee can be a red flag, indicating that the agency is not confident in its ability to successfully collect debts or is unwilling to align its incentives with those of its clients.
No Option for Fixed Fee Service
Without the option for a fixed fee service, clients may not have the flexibility to choose a pricing model that best suits their needs and financial situation, potentially leading to higher costs.
No Spanish Collections
Inability to provide services in Spanish excludes a significant portion of the U.S. population, limiting the agency’s effectiveness in regions with a high Spanish-speaking demographic.
No Credit Bureau Reporting
Failure to report to credit bureaus may reduce the leverage the agency has over debtors, as the threat of a negative impact on credit scores is a powerful motivator for payment.
No Check for Litigious Debtors
Not screening for litigious debtors can expose your business to legal risks, as these individuals may be more likely to sue for perceived violations of debt collection practices.
Some individuals have a history of suing businesses. These trouble makers will levy false claims and excuses to file a lawsuit against you.
Only Aggressive Tactics
Relying solely on aggressive collection tactics can damage your business’s reputation and relationships with customers, in addition to risking non-compliance with laws governing debt collection.
A lack of established track record can be a risk, as newer agencies may not have the experience or resources to effectively manage and collect debts.
No Two-Factor Authentication
Does your agency allow you to access accounts, just by entering username and password? What if your username and password are stolen or hacked, all the sensitive data of your debtors will get leaked. Two factor authentication means, apart from username and password, a new one-time password is emailed to you each time you login. The absence of 2-factor authentication in their systems can indicate poor cybersecurity practices, risking sensitive data breaches.
No Skip Tracing
Without skip tracing capabilities, the agency may struggle to locate debtors who have moved or changed contact information, reducing recovery rates.
Non-Committal to FDCPA and State Laws
An agency’s non-commitment to the Fair Debt Collection Practices Act (FDCPA) and state laws governing debt collection practices is a major red flag, indicating potential legal risks for your business.
Not Bonded or Insured
Being unbonded or uninsured means the agency does not have financial protection in place, which could be problematic in cases of errors, omissions, or legal judgments against the agency.
Recognizing these red flags can save your business from potential financial loss and legal issues. It’s crucial to conduct thorough due diligence when selecting a collection agency to ensure they are compliant, experienced, and capable of handling your specific needs while maintaining your business’s reputation and customer relationships.