Debt Recovery- it is something that takes place in every business as well as industry. There are times when clients, customers or even former employees fail to pay back the amount given to them. Even calls. emails, letters etc. are not of much use. At this point in time, a business actually looks for a debt collecting firm.
“A debt collecting firm is known for getting the money that needs to be paid. They know all the tricks that would work in order to get the work done. But due to the increased number of debt collecting firms in the market, it at times is a task to find one that matches your needs. Here is where we can help you.”
-Kritika Chabbra (Market Analyst, MUDS Management Pvt. Ltd.)
The various steps to be followed while opting for a Debt Recovery firm are as follows:
Step #1: Doing a Thorough Market Research
There are certain specific areas that each debt collection agency specializes in. For instance, a few specialize in acquiring funds from large companies. On the other hand, there are few that do well while working with home-based or small businesses.
It is thus important to do thorough market research. It helps in finding as well as analyzing the results of each of the debt collecting agencies and it also provides a fair view of the kind of debtors that the collection agency specializes in dealing with and also the kind of business it serves.
Step # 2: Authenticating the Agency’s Legitimacy
The rules for the various debt collection agencies operational in various states and localities vary. Hence, it is important to check thoroughly. One should note that agency you opt for must adhere to the rules set by the Fair Debt Collection Practices Act. They should be bounded and license as well.
“The thing to note is that once you have hired an agency, you won’t be receiving the entire amount that you owed. Thus, it is advised that you exhaust all the other available options before hiring a debt collecting agency.”
— Isha Malik (Company Secretary, MUDS Management Pvt. Ltd.)
Step # 3: Check with the Agency If the Use ‘Skip Tracing’
In order to battle the practice of debtors skipping town, the collection agencies have started using ‘skip tracking’. Here, the agency has access to a lot of databases which actually allows them to find out the debtor who had actually left without any forwarding address.
This becomes even more important when you have been contacting your debtor for long but have been routinely ignored.
Step # 4: Making Sure That the Agency You Opt For, Has Insurance
In case, the debt collector agency uses aggressive tactics or acts in bad faith, all your research goes in vain. In any such instance, the debtor can sue. Even if you win or you don’t win the case, one wishes to be sure that he/she won’t be held liable for the hiring agency. Be sure, and get proof of insurance from the debt collection agency in an unlikely event that the debtor takes both the parties to court. This is also known as ‘errors and omissions insurance’ and is held by good agencies as protection.
Step #5: Evaluate the Fees and Contingency Costs
It is important to look into the cost before actually finalizing an agency. It is important to evaluate the cost as the way each agency functions, is very different from one another.
“Dealing with debtors can be slow, frustrating and mentally taxing. It can even drain all your resources. When you find yourself stuck without any other resource left, it’s advised to hire a debt collector instead of simply letting the debtor run away with your hard earned money.”
-Shweta Gupta, Founder, and CEO, MUDS