Whether you run a sole-proprietorship or a small, medium, or large-sized business, you may run into a customer who hasn’t paid on time. After repeatedly sending them invoices and reminders on phone, email, or registered post and receiving only broken promises, you may have realized that your in-house collection efforts aren’t working.
Rather than write off the debt, you may consider using the services of a debt collection agency. After all, you’ve completed your end of the bargain and deserve to be paid. But you may hesitate because of some alarming myths about debt collection agencies.
Thanks to TV and magazines, many people falsely believe that the most successful debt collectors use shady tactics to collect debts, such as threats, harassment, abuse, and other strategies from the tough-guy routine. Sure, a minority of debt collectors still use such underhanded means. They may pressure a debtor by shaming them in front of others, use foul language, threaten bodily harm, or may call them in the middle of the night. However, such tactics are becoming increasingly rare.
Most effective debt collection agencies know that customers usually don’t respond well to being bullied. Instead of underhanded tactics, they treat all late-paying customers with diplomacy for the following reasons:
1. It works
You can learn from industry leader Summit A*R – who find astonishing success with their famous “P.H.D. Philosophy” (Preserve Human Dignity). This means that their highly experienced and trained debt recovery professionals treat all debtors with dignity and respect by bringing humanity back to debt collection.
Their friendly, professional, yet stern approach is highly effective. They boast twice the national recovery rate. They believe that most debtors want to pay their debts. So, they work with them to find a way to do so. This methodology has helped them earn positive reviews from clients and debtors alike as well as an A+ rating from the Better Business Bureau (BBB).
Their approach works across various industries, including consumer collection, medical collection, dental collection, and even commercial debt collection. This approach is also effective when they do business to business debt collection because there are people behind every business. Just like consumers, the debtors behind businesses respond positively when treated with humanity.
Of course, this approach alone doesn’t always work. Usually, most debtors clear their debts after demand letters and official phone calls from a reputable debt collection agency. Skilled negotiation tactics are used to help them find a way to pay what the owe. However, some debtors can be more stubborn.
Agencies can report such debtors to the three major credit bureaus. Delinquent customers are more willing to pay off their loans when they realize that their credit rating could be negatively impacted. A black mark on their credit report can hamper their ability to buy a phone, lease a car, or rent a home. Likewise, businesses also don’t want their credit report to be adversely affected by an unpaid debt. A bad credit report can affect a business’s ability to secure a crucial financial package from a funder or do business on credit with its key partners.
Delinquent customers who aren’t affected by these actions are handled differently. A debt collection agency in partnership with their client may pursue legal action if it’s financially feasible.
Many delinquent customers skip town to evade debt collectors. They may delete their social media profiles, cut off ties with friends and family in their hometown, and move across state lines where collection laws are different to escape their responsibilities. However, they’re not untraceable. Several renowned debt collection agencies have skip tracing departments led by experienced private investigators. Using cutting-edge technology, these investigators can find most debtors and their assets. Professional debt collectors are also well-informed about debt collection laws across different states.
2. It’s the Law
After numerous complaints from debtors that they were being harassed by a minority of debt collectors with threats, robocalls, and visits to their family, friends, and employers, the Federal Trade Commission (FTC) took action. Congress passed the Fair Debt Collection Practices Act (FDCPA) because of “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.”
This federal law puts limitations on the actions of debt collectors, covering the collection of mortgages, credit cards, medical debts, and other types of personal, family, or household debts. Agents violating these laws can also be sued by debtors. Over the years, the FTC has issued millions of dollars of fines for those that broke the law. It has also blacklisted many agencies.
3. It’s Good for Client Reputations and Relationships
Another reason that ethical agencies are more successful than unethical ones is that their approach is good for business. In the digital age where a piece of negative news can cause a company’s stock value to plummet almost overnight, most businesses avoid negative publicity.
A negative experience from a customer that goes viral due to harassment can be hard to contain. When a company develops a reputation for mistreating clients, even if such clients owe them money, then other businesses may refuse to work with them to preserve their reputation.
A diplomatic approach to debt collection also works when collecting revenue from other businesses. Relationships between businesses are carefully cultivated. A business that owes you money today may turn into your most vital partner tomorrow. An agency with an ethical approach can recover revenue while preserving this relationship.
4. It’s Becoming the Industry Standard
There are over seven thousand debt collection agencies in the United States alone. Many of them are affiliated with some powerful and influential organizations like the ACA International and the International Association of Commercial Collectors (IAACC).
Both organizations boast thousands of members and offer resources, programs, and other facilities to help promote leadership, professionalism, ethics, education, support and other important values in the debt collection industry. Among other things, they want debt collectors to help find ways to pay their debts in a manner that’s ethical.
The face of the debt collection industry is changing. The days when agents acted like wiseguys from an old Martin Scorsese are ending. Still, some agents use shady tactics. If you’re in the market for a debt collection agency, then partner with an ethical one. It’s good for business and you’ll sleep better at night.