Total consumer debt in the United States stands at over $13.5 trillion, including mortgages, auto loans, credit card and student loans. The average indebted household owes over $8000, while the average American owes over $4000 in credit card debt.
To make matters worse, more Americans are falling behind on credit card and auto loan payments. Even celebrities are in debt. Some owe millions of dollars while others have declared bankruptcy. Celebrities who’ve faced financial challenges include Floyd Mayweather Jr., Kim Basinger, Burt Reynolds, and Nicolas Cage.
In this financial climate, it’s not surprising that businesses are partnering with debt collection agencies. Over 4000 debt collection agencies are operating in the United States with around 450,000 employees. However, many businesses are wary of partnering with debt collection agencies because of certain misconceptions. Here are some things may not have known about debt collection agencies:
#1 Most Don’t Use Shady Tactics
Although a minority of debt collection agencies use underhanded tactics such as intimidation and harassment, many are responsible businesses. What’s more, several powerful trade groups promote ethical debt collection and fair practices, such as ACA International. Members of such groups are more likely to operate fairly.
Also, there’s a federal law that limits the behavior and actions of debt collectors called the Fair Debt Collection Practices Act (FDCPA). Debt collection agencies that don’t abide by the FDCPA can get heavily fined and blacklisted by the Federal Trade Commission (FTC).
Ethical practices also improve the effectiveness of certain debt collection agencies. For example, Summit A*R boasts twice the national recovery rate, even though they treat debtors with dignity and respect. Not only is their diplomatic approach to debt collection effective, but it helps preserve the reputation of the businesses that partner with them.
#2 They Are a Better Option Than In-House Collection Departments
More businesses are choosing to partner with debt collection agencies rather than use an in-house collection department for the following reasons:
- Debt collection agencies are more experienced and skilled at collecting revenue
- Most businesses don’t have enough delinquent accounts to justify training and running an in-house collection department
- Many debtors respond more positively to a demand letter when a reputable agency is involved
- Unlike an in-house collection department, debt collection agencies can report customers and businesses to credit bureaus, which incentivizes debtors to clear their dues
- In-house collection departments usually write off debt much faster than an effective agency
- A debt collection agency has the resources to chase a debt collector and their assets, even if they’ve crossed state lines and gone into hiding
#3 They Work with Small Businesses
Many small businesses believe that they can’t afford to partner with a debt collection agency. However, not every agency demands a certain number of accounts or payment upfront. Some work with businesses on a contingency basis – they only collect their fees after they’ve successfully recovered revenue. Such agencies are ideal partners for small businesses and sole proprietors that have limited resources.
These are some things you may not have known about debt collection agencies. Most are an essential component of the economy and use ethical and diplomatic methods. Moreover, they help businesses function by recovering their much-needed revenue.