Using a Debt Collection Agency

While many business owners will first attempt to collect unpaid debts on their own, the time and effort that it takes to successfully collect these debts can be quite consuming, and detract from your regular business activities.  Although collecting unpaid debts is a necessary part of running any business, it is also an activity that is sometimes best left to professionals, which exist in the form of debt collection agencies. 

Choose a Reputable Debt Collection Agency

Debt collection agencies must comply with all state and federal laws pertaining to debt collections, including the Fair Debt Collections Practices Act, which prevents debt collectors from taking certain actions to threaten, harass, or otherwise intimidate debtors.  Check with your local Better Business Bureau in order to see if they endorse the debt collection agency that you wish to use.  Talk with other business owners to see which debt collection agencies they would recommend. 

Weigh the Costs of Using a Debt Collection Agency

In order to hire a debt collection agency, you typically will sign a contract that sets forth the services that the agency will provide, as well as the agency’s charges for these services.  Most debt collection agencies work on contingency; that is, the agency will receive a certain percentage of the debts that are collected, which usually is around 50% of the monies received.  If the agency is unable to collect on the debt, then the agency is not paid for its services.  However, some types of services may be excluded from the typical contingency fee or cause you to incur additional costs, such as filing a debt collection lawsuit. 

Consider Whether Using a Debt Collection Agency Will Be Effective

There are some circumstances in which using a debt collection agency will be more effective than others.  For instance, if your debtor has informed you that he or she is planning to file for bankruptcy, then it may be a waste of your time to refer the matter to a debt collection agency; in this circumstance, you should probably consider contacting a lawyer.  If you need to collect a large debt, potentially paying half of it to a collection agency might be undesirable.  On the other hand, if you have a number of relatively small unpaid debts to collect, many debt collection agencies will charge you fairly nominal prices for their services. 

Contact a Debt Settlement Attorney for Advice

If you are unsure as to whether you should contract with a debt collection agency to collect your unpaid debt, you should contact an attorney for advice.  An attorney can help you explore all options available to you for collecting your debt, and choose the option that is most cost-effective for your business.