8 Questions to Ask Before You Hire a Debt Collection Agency

If you need to hire a debt collection agency, make sure you hire the right one.
Here are some useful tips to consider before hiring a collection agency:

Are they reporting to the credit bureaus?

A debt collection agency may utilize its ability to report unpaid debts to credit bureaus. In general, a debt or delinquent account negatively affects a debtor’s credit score for up to seven years—which is why debtors will often agree to payment arrangements simply to avoid credit-score damage.

Will they handle your "skip-tracing" needs?

Unfortunately, sometimes debtors skip town. To combat this practice, good collection agencies use what is known as “skip tracing”, which means that they use and have access to several databases that allow them to locate a debtor who has left no forwarding address. This is especially important if you’ve been personally contacting your debtor and have been routinely ignored.

Are they Associate?

The ACA International Is the Association of Credit and Collection Professionals.

The ACA International is the largest debt collection association who ensure its members perform professional and ethical.

Verify that the agency is up-to-date on compliance and certifications:

Most states require consumer collection agencies to be licensed in the state where they are collecting debts. There are states who will require the agencies to be bonded as well. You can check to see your state’s licensing and bonding requirements on this state-by-state list.

What tactics will they use to collect the debt?

Your reputation is paramount, and you want to ensure that the debt collector doesn’t use collection methods that harm yours. For instance, refusing to negotiate if the debtor is having difficult financial times isn’t illegal, but you might not be comfortable with it.

For medical providers verify if they are HIPAA compliant.

If you are looking to hire a debt collection agency to collect unpaid medical bills, be sure to verify if the agency is HIPAA compliant. The Health Insurance Portability and Accountability Act (HIPAA) sets the standard for sensitive patient data protection.

Are they working on a contingency or flat fee model?

Most debt collection agencies use the contingency-based model nowadays. In plain English, that means they only charge if they successfully collect. Fees average 25 to 45 percent of the total amount of debt collected per account.

With flat fee, you get charged a fixed fee that is charged upfront—regardless of account age, volume, industry, average balance, or any other variable. The flat fee is generally $15 to $25 per account.

Will they provide you an online portal?

24/7 online access to your account is not a luxury, and your collection agency should give you access to an online portal with the ability to upload monitor and generate reports easily.


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