Collection agencies recover debt for various kinds of business such as banking, retail, financing institutions and healthcare. Any business that does not have the necessary resources to collect bad debt is greatly benefited by the services of collection agencies. Collection agencies have the necessary skill, tools and resources to recover debt on time in an efficient and customer-friendly manner.
Collection Services are categorized according to the services they render and the type of business they work for. It is important to pick the right agency based on your industry or type of debt. Various types of services are as follows:
Commercial collection agencies
Commercial collection agencies collect financial debt for banks, retailers, auto loan financiers and credit companies. The debts could be credit card bills, auto loans, mortgage payments or other loans. Collection service buys the debt from the creditor at a pretty low rate. The creditors sell the debt because they no longer expect it to be settled. After buying the debt, the collection agency contacts the debtors and proceeds to recover a good percentage of the debt from them. This is how they make profit.
Healthcare collection services
Healthcare providers charge patients for medical treatments. Most healthcare organizations are too swamped to follow-up on payments that are delayed or not made. Healthcare providers partner with collection agencies to collect payments from customers. The collection service works out a debt recovery strategy in accordance to the healthcare provider's business policies and debt collection laws. The collection agency gets a percentage of the debt recovered from the customers.
Retail/Consumer collection agencies
Retail collection agencies cater to businesses such as telephone companies, electricity companies, department stores, cable companies, software/hardware companies, membership clubs, etc. The customer account is either sold to the collection agency or transferred for debt collection.
Bad check collection agencies
Paying with a bad check is in itself a criminal offence and can lead to prosecution if the amount is substantial. Bad checks add to the bad debts incurred by the business. Collections are conversant with the legal know-how involved in handling bad checks. They will try to get the full amount specified in the bad check or a percentage of it from the customer.
Debt collectors work in accordance to FTC regulations. The first step in debt collection is sending a demand letter to the debtor. The demand letter will talk of the creditor whose bill needs to be paid by the debtor, the amount of debt, details and a payment date. The debtor is advised to settle the payment by the date specified in the demand letter. Many times, the intervention of a collection agency is sufficient to get the customer to settle the dues.
The demand letter is followed by a phone call from the debt collectors. The collection agent explains the demand letter and tries to build a rapport with the debtor. The purpose of the interaction is to get some sort of commitment from the debtor. These agencies have the infrastructure to frequently call customers, and even collect payments over phone.
Collection agencies negotiate with customers to recover the payment in total or installments. They help businesses reduce bad debt and maximize revenue.