Research is a big part of my Debtor life. I do my research before I buy a car, when I hire someone, when I implement a business system, or when I make important decisions for myself or others. You may have a similar approach (hey, you are reading a blog about vendor screening).
What about hiring a debt collection agency. Your business may come across clients who refuse to pay their bills despite your best efforts. Instead of writing off the debt, it is better to hire a collection agency. You should actually have a collection agency available to handle any overdue debt. But more on the …) later.
You may have questions, especially if this is your first time. How can you tell if a collection agency is in line with your business principles? Do their collection techniques harm your brand reputation? It’s best to conduct initial research as it will help you avoid any problems later.
These are eight questions that you should ask a collection agency before you hand over your first customer account.
1. Do You “Get” My Industry?
Some debt collection agencies specialize in particular industries or niches. Ask the agency which industries or businesses they specialize in and what types of debtors they deal with. A collection agency that works with similar business models to yours could help increase your chances of being paid. Don’t believe any agency that says all business debt is the exact same.
2. 2. Are you able to collect where my debtor is?
Canada’s consumer collection agencies must be registered and licensed in the respective province where the debtor is located. Each province also has its own legislation that provides some assurance that the account will be treated professionally and ethically. A business must be licensed in all Canadian provinces or territories and must also post a substantial surety guarantee bond. A collection agency must also have a physical office within the province to collect consumer loans in Quebec.
You could be held liable if an agency is not licensed or properly licensed works for you.
You might find a licensed agency that will tell you what it is. You can check the license of any debt collection agency you are considering. Here are links that will allow you to search for any agency in Canada by name. Click the link to the agency where the debtor is located:“Federal Management”
British Columbia * Alberta * Saskatchewan* Manitoba * Ontario * Quebec* New Brunswick * Nova Scotia* Prince Edward Island * Newfoundland & Labrador* Yukon * Northwest Territories* Nunavut
Tip If you’re looking for MetCredit, search also “Metropolitan Credit Adjusters” in Quebec or “HT1_ Agence des recouvrement du credit Metropolitain .
3. Are you insured?
The possibility exists that the debtor feels unfairly treated and may sue the collection agency. Make sure that the agency you hire has Professional Liability insurance. Although not required for Canadian collection agencies this insurance will cover you if the agency is sued while handling your accounts. Third-party insurance does not always exist. It is wise to have your own Professional Liability policy. Your business, not your collection agency, would be held responsible if a judge finds you have failed to fulfill your promises.
4. What tactics do you use to collect debt?
It is important to maintain positive customer relationships in order to keep your brand reputation (for more information, see my blog post on business perception management).
Partnering with an ethical collection agency is key to maintaining a positive relationship. A collection agency that is professional and respectful, but still tries to find solutions. Only one Canadian collection agency focuses on “Respect for Individuals.”
Discuss the collection methods used by agents to collect debts with the agency and agree on a collection plan you can both support. It’s a good idea to request a tour of the office or ask for references. You can check out reviews online and BBB ratings. MetCredit, which has been accredited since 1974, has an A+ rating.
5. Is it easy (or hard) to submit accounts?
Although it is not difficult to start a collection agency, you will need some basic information. Ask the agency how long it takes to set up, what information is required to get started and how accounts will be submitted. It is usually a lengthy and paper-intensive process. MetCredit provides a unique online secure system that allows you load debtor information direct. There are no hidden fees or hassles, and you can load debtor information online at any hour of the day, night, or weekend. You’ll love its simplicity and ease-of-use!
6.Can You Locate a Debtor Who Has Disappeared?
Some debtors will go to great extents, even move around, in order to avoid paying their bills. Skilled skip tracers are used by good collection agencies to locate absentee debtors. The agency can legally access various databases and other information sources in order to locate a debtor who (often intentionally) has not left a forwarding address. The chances of a debtor who is absentee are greatly improved by skip tracing.
7. What will your services cost me?
After you have found a debt collection agency you think might be a good fit for your company, you will want to find out the exact cost of its services. You won’t be surprised to find that every agency charges a different fee structure, even though they may have similar fees.
Some agencies charge a percentage of the amount collected, while others charge a fixed fee based upon the debt’s size. It is normal for the type and amount of debt to be considered. Each commission rate can vary for landlord-tenant debt collection, personal debt collection, and commercial and consumer debt collection. The best collection agencies will cover all costs upfront including disbursements and fees. They won’t charge you until they collect. The only exception to this rule is when legal action is required to recover debt. You must have your prior permission before you can initiate legal proceedings or incurring fees.
Bonus question to Frontline Collections: Ask a potential collection agency if they have an in-house legal department that can minimize fees in rare cases where debt litigation is necessary as a last resort.
8. 8. What is the success rate of the Collection Agency?
As I said, fee structures are usually fairly similar. The difference lies in the success rate. Great collection agencies are efficient and effective. MetCredit’s goal is to collect within 2 days after we start calling. We usually achieve this goal. A failing agency might not charge you, but it will rarely give you another chance.
Do Your Research Carefully – But Don’t Wait
It’s not difficult to deal with debtors while running your business. It is always better to have an ethical and experienced Debt Collectors than to let a customer walk away without paying you. It’s a statistical fact that the probability of you collecting a debt drops every day.
Don’t delay in bringing a collection agency aboard. Due to the fact that most Canadian provinces have a two year statute of limitations for debt collection, I urge you to conduct your research before it becomes urgent and find the best debt collection partner to suit your business’ needs.
