How to Choose a Collection Agency

teamCreditors should be looking for a partner that will be the best collection agency for their accounts. But often, as discussed in this article in Collector magazine, a flawed Request for Proposal can make the decision making process less successful. Here are six problems industry insiders frequently see, and how to solve them.

  1. Out of place, boilerplate language. You wouldn’t use the same RFP when choosing a tree-trimming service that you would when choosing a collection agency. But all too often, those documents look very similar, containing a lot of questions that do not apply to the bidder. Collection services are pretty specialized, so you and the agency will benefit if you streamline the document and be specific about what you need from a collection agency.
  2. Asking about company size. Asking an agency how many employees they have, or how many employees would be dedicated to their account, will not necessarily give you a clear idea of how much work they can do for you. These days most collection agencies rely on sophisticated technology to automate work and streamline tasks. Better questions to ask would include;
    1. What is your average total number of accounts placed per month?
    2. What is your average daily outbound call rate?
    3. What is your meaningful contact rate?
    4. What is the average number of accounts per collector?
  3. Failing to provide essential information. It is a huge misconception that the less an agency knows about a creditor’s collection history and average account balance, the lower they will bid. In fact, the opposite is true. Without this kind of information, the agency is likely to bid high, because the accounts could turn out to be unprofitable. This will force them to be cautious.
  4. Overreliance on recovery rate. It makes sense to ask an agency about their recovery rate, but it is a very difficult number to pin down. Recovery rate will vary from agency to agency simply based on their client list. Collecting on accounts for a huge healthcare system is going to yield very different results from collecting on accounts for a small physician’s office. It is a good idea to ask the agency how they calculate their average recovery rate. But perhaps a more meaningful gauge would be to talk to references: find out what their reputation is with their own clients.
  5. Blinded by fees. Don’t make the mistake of letting the low bidder knock out all the other applicants. Experience and qualifications count for a lot. What really matters is how much you are getting back for every dollar spent. Lower fee and higher recovery rate rarely go together.
  6. Not validating compliance and data security. Don’t just ask if an agency observes state and federal regulations. Insist on certain standards, and detail what data security requirements and audits agencies must have to get the contract.

CCS has a proven track record in a variety of industries. We customize our services to our clients’ needs, and offer everything from pre-collection letter services, to training, billing/early out, credit policy review, debt collection, and payment processing/merchant services.

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