• Fair Capital

The Pros and Cons of Hiring a Debt Collection Agency

We all expect customers to pay on time, but unfortunately, this is not always the reality. Using a debt collector has some obvious advantages, but It’s wise to consider its potential disadvantages, too.

The advantages and disadvantages of using a debt collection agency.

The Benefits

Successful and faster debt recovery.

Along with negotiation and persuasion skills, professional debt collection companies like Fair Capital use various techniques that significantly increase the likelihood of collecting a debt.

Remove the hassle and heat from your company.

Reaching out to clients to discuss their past-due invoices is not always very comfortable, and no one loves the job of arguing with clients who refuse to pay. When you hire a collection agency, you free yourself from the unpleasant task, giving yourself time to focus on what's important – your business.

Debt collectors have tools and resources.

"Reliable debt collection agencies," says Steve, a team supervisor at Fair Capital, "will use advanced skip-tracing technology to help locate debtors. Debt collection agencies will also report delinquent accounts to credit reporting agencies, which may negatively affect a debtor's credit score. Debtors often arrange to pay their debts to avoid damage to their credit."

Legal protection.

When you hire a collection agency, you mitigate the legal risks involved in collecting debt by yourself.

Several federal and state laws govern the collection of past-due receivables. A well-informed debtor will not hesitate to sue if they believe the law has been violated.

Aside from acting as a shield between you and your debtor, a reputable agency will know all the federal and state laws relevant to debt collection.

Shift your focus to what matters.

Having a collection agency deal with your collections will allow you and your employees to focus on your core business activities instead of wasting energy on collecting unpaid bills.

Legal assistance.

A good debt collection agency can take care of everything for you.

For example, if filing a lawsuit proves necessary, you can rely on the agency to employ its internal or affiliate attorneys as part of the debt collection process. Ultimately, this will yield a higher success rate than hiring your own attorney.

Additionally, with only around 80% of judgments being collected, a collection agency will know when it is practical to file a lawsuit. A collection agency can also use tools to enforce judgments to deliver a complete service.

The drawbacks

Debt collectors charge for their services.

The cost of collection services Is something to consider. The cost of employing a collection agency may range from 20% to as high as 45% of the amount collected if working on a contingency model. However, most companies believe collecting some debt is better than losing everything owed.

Client relations could be affected.

Outsourcing to a debt collection agency can cause an adverse reaction from clients. Getting a call from a collection agency can put a bad taste in a customer's mouth, especially if the agency lacks empathy skills. Avi, the CEO of Fair Capital, often says, "The two vital components of a debt collection agency are Compliance and Respect."

The bottom line.

There's no one-size-fits-all answer to the debt collection agency debate; some businesses will benefit more from bringing in outside help, and some less.

With all this in mind, it is clear that drawbacks can be reduced by being mindful of which agency you hire.

Hire the agency you can trust

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