Commercial debt collection agencies are hired by companies when collecting delinquent invoices. These organizations often act as a middleman, responsible for contacting debtors who are at least 60 days delinquent, retrieving the past due to funds, and remitting the debt to the creditor. Debt collection agency fees are charged to the creditor. These are typically between 25% and 50% of the amount collected from the debtor.
Commercial debt collection is generally hired by a variety of companies. They can attempt to retrieve all types of debts, including
- Credit card
- Medical bills
- Auto loans
- Personal loans
- Business loans
- Student loans
- Utility bills
- Cell phone bills
Businesses may reach out to debt collection firms for almost any type of delinquent debt in the hopes that the agency can retrieve the funds. However, most agencies focus on specific types of debt, and all should limit their activity to debt that is within the statute of limitations for that state.
How do debt collectors operate?
Once you partner with a commercial debt collection agency to reach out to delinquent borrowers through letters and phone calls, if the contact information is incorrect, they’ll research online or hire a private investigator and locate the individual. Besides, they’ll identify the debtor by searching assets, i.e., bank accounts, brokerage accounts, and more.
Basically, commercial debt collection reports delinquent accounts to credit bureaus in order to damage the individual’s credit score in an attempt to get debtors to pay off their debt. Besides, debt collection agencies can take individuals to court and judgment against them. This allows the garnishment of wages and bank accounts.
However, you must know that winning the case may not guarantee receiving funds. Here the debt collection agency may try to levy on bank accounts or motor vehicles. They even try forcing the sale of assets when obtaining payment and remit the debt to the creditor.
How collection runs
When the client fails to pay bills, a business must turn to a service provider that helps them. Rather than sending a letter, companies must keep on chasing the customer. Here’s what experts need to focus on.
- Purchasing debt
There are companies that make money by purchasing debt from creditors. They purchase the debt at a low cost and start an aggressive collection strategy. Since they buy them at incredibly low prices, they make a good profit from the collection.
- Collection agency fees
Collection agencies profit through fees. They generally charge clients for their debt collection services. However, you must keep in mind that fees vary by agency. Also, some commercial debt collection agencies may charge a flat fee, while others may go for a commission. Agencies may also charge fees in the form of percentages.
Regardless of the method, agencies that charge fees and collect the debt must make a profit.
Before you hire a collection agency to collect a debt, it is essential to understand the collection agency fees. Your firm must discuss costs with the agency prior to partnering with them. While hiring may not guarantee success, it does increase the chance of collection.