As an auditor, Iâve had the unique opportunity to observe the dynamics between creditors and collection agencies. What Iâve learned is this: being a good client isnât just about offering the highest commission rate.
If you want to build strong, mutually beneficial relationships with collection agencies and ensure that your accounts receive the attention they deserve, there are several factors to consider.
How to Be a Better ClientÂ
Being a profitable client to a collection agency goes beyond the monthly commission check. Here are key areas to review:Â
Payment of Commission Fees
How quickly does your company pay commission fees to the collection agency? Timely payments can help agencies maintain cash flow and ensure they allocate resources effectively to manage your accounts.Â
Commission Rate Adjustments
If youâve recently reduced commission rates:Â
- How far in advance did you communicate this change?Â
- Did you ask the agency how the reduction might impact their ability to allocate resources to your portfolio?Â
Reducing commission rates without consulting the agency can unintentionally deprioritize your accounts. Agencies may reassign their experienced collectors to other portfolios, leaving your accounts to be handled by less experienced new hires.Â
Unnecessary Contractual Requirements
Review your contractual requirements. Are they realistic for the agency? Ensure that every requirement is practical and applicable.Â
Ending Relationships with Agencies
How you part ways with an agency matters:Â
- Did you engage in documented discussions about their performance before ending the relationship?Â
- Were they given an opportunity to make changes or address concerns?Â
- Were accurate and consistent reports used to monitor their performance?Â
Fair and transparent evaluations create a professional and constructive environment, even when itâs time to move on.Â
Business Politics
Sometimes, collection agencies are hired or terminated based on the personal history of management with certain firms. Preconceived notions can cloud judgment, impacting the effectiveness of the relationship. Itâs essential to ensure these decisions are based on data and performance, not personal bias.Â
Audits
The collections industry operates within a highly regulated framework, requiring strict compliance from all parties involved. Creditors are tasked with ensuring that the collection agencies they work with adhere to these regulations. However, a trend I’ve observed lately is the overlapping efforts of multiple teams from the same creditor conducting audits on the same collection agency. These audits often focus on identical categories, resulting in duplicate work for the agency being reviewed.Â
This raises the question: can creditors streamline their processes to avoid duplication? By coordinating efforts and assigning specific areas of focus to each auditing team, creditors could not only save time but also improve the effectiveness of their compliance monitoring. Â
Understanding the Collection Agencyâs ExpensesÂ
To be a truly valuable client, itâs important to understand the costs that agencies incur to serve you effectively. These include:Â
- Employee-Related Costs – The collection industry faces a high turnover rate, which means agencies spend significant resources on hiring, training, and retaining employees.Â
- Insurance – Agencies often need to maintain various types of insurance to comply with regulations and protect their business.Â
- Communication Expenses – Effective collections require multiple channels, including phone calls, text messages, emails, and traditional mailâall of which add to their operational costs.Â
- Technology – Collection agencies rely on robust software systems to manage accounts, track payments, and remain compliant with state and federal regulations.Â
- Licensing Fees – Many states and some cities require specific licenses for collection agencies to operate legally, which can be a significant expense for agencies managing accounts across multiple jurisdictions.Â
Why This MattersÂ
Building a partnership based on mutual respect and understanding can lead to better outcomes for both parties. A successful relationship with your collection agency doesnât just benefit you financiallyâit ensures your accounts are handled with the care and attention they deserve.Â
By taking the time to review your practices and understand the challenges agencies face, you position yourself as a client worth prioritizing. That, in the end, makes all the difference.Â
Author: Bev Evancic
Bev.Evancic@ResourceManagement.com
Bev Evancic is a Senior Vice President at Resource Management Services, Inc. Prior to employment at RMS, Bev worked as the Collection and Recovery Manager at AT&T Universal Card, Citi, and Federated Department Stores. Bev started in the collection industry as a collector at an upscale clothing store in Cincinnati, Ohio. As a returned check and private label credit card collector, Bev gained a basic understanding of the collection industry that has not changed with the introduction of regulations. Her collection philosophy begins with the idea that businesses and customers benefit from preserving the customer relationship. First, collectors need to attempt to contact customers when it is convenient for the customer to discuss his/her financial condition and willingness/ability to pay. Second, you never collect money by intimidating or threatening customers. Third, businesses must make sure the debt is valid.Â
She has managed all phases of collection and recovery operations, including automated dialer units, bankruptcy, and legal units, skip tracing units, internal collections, outside collection agency networks, and Consumer Credit Counseling. As a Consultant for Resource Management Services, Inc., Bev has spearheaded collection and recovery best practices reviews for many top credit grantors. Her articles on dialer operations, agency management and bankruptcy best practices have been widely publicized.Â
She is well known and regarded as a specialty expert in the areas of: Repossession, Bankruptcy, Estate, Litigation, as well as Pre- and Post- Charge-off. Prior to joining Resource Management Services, Inc. in 1995, Bev managed the Recovery Department for AT&T Universal Card Services where she developed the bankruptcy, probate, internal and litigation processes.Â
She is the author of âRecovery Management: Collecting the Uncollectible Account.âÂ
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