Deciding when to end a relationship with a collection agency is rarely easy. In some cases, the decision is clear—fraud, non-compliance with regulatory requirements, serious contract violations—these are all non-negotiable deal-breakers. But what about when an agency is simply underperforming? Or when they fail to provide the level of transparency and data you need?
These grayer areas can be tricky to navigate. Do you push for improvements, or do you move on? Where do you draw the line between an agency going through a rough patch and one that is no longer the right fit?
It’s frustrating, it’s depressing, it’s difficult to know when you can salvage the relationship with mediation of issues, and when it’s just time to move on.
Defining Performance Expectations
Before deciding if an agency is failing, it’s important to define what success looks like. Collection agencies operate in dynamic environments where external factors—economic conditions, regulatory shifts, and portfolio quality—can all impact results.
It’s important to realize that many times the creditors themselves have made changes that impact the relationship. Sometimes it’s quality of work sent, (for example, if you created a new and enhanced internal collection effort prior to placement), or maybe even underwriting changes that affect the collectability of the portfolio. Sometimes it’s additional reporting requirements that have been implemented, or, as an example, a demand to collect older accounts at the same rate and expectations. Sometimes there is a gap in timely activity – by either the agency or the client that causes problems.
So, I start with the question – did I do everything I could do to make this a good relationship, or did I subconsciously affect the agency’s success and performance with my actions. And, are my performance expectations realistic in today’s environment, or did I change the rules, either intentionally or unintentionally.
The Warning Signs of Underperformance
Performance slumps happen. Anyone that follows any baseball team, basketball team, football team, or any other sport can likely cite a multitude of examples where players or whole teams seem to be in a slump, and then they come back to win more consistently. I’ve got a few in mind, but don’t want to offend any fans.
The key question is whether an agency is facing a temporary setback or showing long-term signs of decline. Here are some red flags to watch for:
- Declining returns without explanation – If recovery rates are dropping and the agency can’t provide a clear reason (such as changes in portfolio characteristics or market conditions), it may indicate ineffective strategies or lack of effort. You can check for staff levels on your portfolio to see if things have changed. I’ve always found talking to collectors provides a wealth of information and insights that might lead you to the right direction for the circumstances.
- High complaint volumes – An increase in complaints or type of complaints from consumers, your internal team, or even regulatory bodies could suggest poor collection practices, miscommunication, or compliance risks. This is a bigger red flag, and more definable. Check to see if it’s a collector, a team, or the agency themselves. It’s important to understand how complaints are documented and handled within the agency. See if there have been any changes in the processes, or delays in reporting complaints. Most creditors I know have little tolerance for complaints. And this will sway the decision to the “move on” category faster. But I also check this carefully, I remember clearly a complaint that I was reviewing once, and the call I listened to was one of the worst ever. I immediately thought the worst about an agency that would allow that to happen! After discussing with the agency, it was determined that it was the first call the new collector had on her own, after training. It was observed, the collector was given additional training, and corrective action, and was now a super employee. Believe me, I listened to many more calls from that collector. So, I was glad I didn’t jump to conclusions, but reviewed the entire situation and discovered a one-off situation, not a pattern. So, this is a big warning sign – but review carefully as well.
- Lack of responsiveness – If you have to chase the agency for answers, updates, or reports, that’s a problem. A good partner is proactive, not reactive. This is one area that makes me crazy. I want to scream out… “Who’s the Client here?” I just don’t have a lot of patience for delays, excuses and a general lack of responsiveness. It seems to me it’s about respect. Now, that being said, I also understand that circumstances change, things happen and sometimes things don’t go according to plans, so I temper my temper with a thorough review to determine if it’s a pattern, if it has increased since our original contract or if it’s more likely a “slump” or short-term problem. But lack of responsiveness is clearly an issue for me.
- Resistance to improvement – Since I’m a fan of working with agencies to resolve problems, I look closely at how well the agency in question responds to suggestions for improvement, or suggests areas that would improve the working relationship. Especially in today’s world, I expect the agencies would be continually refining their strategies. If they’re reluctant to adjust their approach despite poor results, it could signal stagnation, and might increase your attitude to move toward the “moving on” stage.
When these warning signs emerge, it’s time for a deeper conversation about their commitment to your business.
The Importance of Transparency & Data Sharing
One of the biggest frustrations vendor managers face is the lack of timely and accurate information from their agencies. Without robust data, you can’t effectively oversee performance or ensure compliance.
Here’s what I like to see from an agency:
- Provide detailed, timely reports on collections, disputes, complaints, and payments.
- Be open about challenges—if an agency is struggling, they should communicate the issue rather than obscure it.
- Ensure data accuracy—inconsistencies between reported performance and actual remittances are a serious red flag.
- Offer insights beyond the numbers—good agencies don’t just report results; they help clients understand trends and optimize strategies.
A lack of transparency is a major issue, as it prevents informed decision-making and increases oversight risk. If an agency consistently fails to provide the information you need, it may be time to look elsewhere.
Addressing the Issues Before Pulling the Plug
Even when performance concerns arise, the first step shouldn’t be termination—it should be dialogue. Strong vendor relationships require open communication and a structured approach to problem-solving.
Some steps to take before ending a relationship:
- Initiate a performance review – Share your concerns with the agency and request their perspective.
- Develop an improvement plan – Set clear corrective actions with measurable goals and deadlines.
- Increase oversight – If transparency is an issue, consider a more hands-on approach (e.g., more frequent check-ins, deeper audits).
- Assess their response – If the agency acknowledges the issues and takes corrective action, they may still be worth keeping. If they’re defensive or dismissive, it could be a sign of deeper problems.
If there’s no improvement despite multiple interventions, you’ll need to make the hard call.
The Decision
Ending a relationship with a collection agency is never a decision you make lightly — nor should it be. The easy calls, like fraud or regulatory failures, almost make themselves. But those middle-ground situations — declining performance, inconsistent communication, lack of transparency — that’s where it gets tough.
The reality is, no agency (or client, for that matter) is perfect. Performance slumps happen, communication gaps pop up, and every relationship hits a bump or two. What matters is how both sides respond. Are they willing to dig in, own the issues, and work together toward solutions? Or do they dodge accountability, deflect blame, or just quietly check out?
For me, it comes down to this — if you’ve set clear expectations, had the hard conversations, given them a fair shot to course-correct, and you’re still not seeing the commitment, responsiveness, and results you need, it’s probably time to move on.
As frustrating as it is, keeping a poor-performing or disengaged agency is far riskier than the disruption of making a change.
As a close friend told me once, “If you have to wonder whether it’s time to walk away — it’s probably already time to lace up your shoes.”
Author: Judy Hammond
Judy Hammond is founder and President of Resource Management Services, Inc. The corporation was founded in 1986 and specializes in auditing and consulting, serving the collection and recovery industry. As President of Resource Management Services, Inc., she has more than 35 years of experience with an emphasis on operational reviews for compliance and operational effectiveness of collection operations, both for creditors’ internal collection and recovery operations as well as collection agencies and attorneys. She has worked with top banks and financial institutions, utilities, credit unions and telcoms, (and their vendors) and has conducted many Best Practices projects. She is author of various industry publications: “Comprehensive Agency/Attorney Usage Study,” “Comprehensive Agency/ Attorney Usage Study II” and “Collect More From Collection Agencies”. Her work with creditors who were looking to sell debt for the first time, and subsequent Buyer/Seller research was the foundation for the second corporation, The Debt Marketplace, Inc. She worked with Dennis Hammond as co-founders of the Debt Buyers’ Association, (now RMAi), building the foundations for industry standards, as well as the original code of ethics. She developed and produced two industry conferences, Collection and Recovery Solutions and Debt Connection Symposium & Expo, from their inception in 2002 and 2006, respectively, to 2022. Prior to starting her own company, she worked with two large collection agencies.
Resource Management Services, Inc. provides Third Party Auditing/Oversight services for Creditors. For more information, contact me at judy.hammond@resourcemanagement.com or check us out at ResourceManagement.com
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