With collection agencies, like everything else, you get what you pay for


Many collection agencies are long on promises and short on substance.  Such is the way of the foreign agency.  An agency which has no financial stake in your local economy and serves only to strip your community of revenue that should be used to help maintain strong local growth.

 Foreign agencies, whether based out of the valley or in some other State, offer low contingent rates and provide well orated promises and tested marketing material that sounds good to the uneducated ear.  So here are some “inside baseball” facts for you to consider.

Foreign agencies who offer seeming low rates make more money off your accounts than those who provide you with an honest rate based on performance.  This scheme has several names, but the one I think is most accurate is “Junk Pricing.”

·         “Junk Pricing” is a term used when the agency gives you a great contingent rate but posts all payments to accumulated interest, retained by the agency, prior to giving you, the assignor, any return, resulting in an interest windfall for to the agency at your and your customer/patient’s expense.

·         “Account aging” is another practice we see with some of the larger regional and national agencies. In this scenario the agency will not even send notice to a debtor until they communicate with the debtor by phone or the debtor questions a collection trade line on their credit report.  This serves to increase the amount of accumulated interest available to the agency prior to first payment and eliminates the expense of sending multiple notices.  Only after the debtor contacts the agency are they provided notice.  To the big regional and national agencies it’s the interest accumulation that serves as the silver lining for profits.

·         “Settling short” is a term used when an agency attempts to settle with the client (assignor) for an amount less than that offered by the debtor, retaining the difference for themselves as a windfall. This is a widespread practice that diminishes integrity within the collection industry.  As a rule the agency should reduce any accumulated interest by the same or greater percentage than the reduction approved by the client.  

The fact is that local agencies, on average, well out perform regional and national agencies as a whole, providing superior return to their clients.  The reason is that your local agency, who is part of the same community that you are, is as much motivated by providing a superior service as it is to making a profit.  Foreign agencies have no reason to consider this. They are not part of our local economy and have little reason to concern themselves with one particular community save their base of operation.  Monies that could be used by local agencies to strengthen the local economy or benefit local charities are stripped and used for executive bonuses and luxury purchases in foreign communities.

With regulatory issues equally realized by local agencies as large foreign agencies, security and technology standards are often higher at the local level. Further, large agencies are more likely to violate regulations due to the sheer number of collectors competing for bonuses and benefits and, with regard to out of state agencies, often operating on a state regulatory waiver allowing them some avoidance of regulatory enforcement for violations.