OK, you have decided you need some help collecting some old receivables. Which is a better choice – an attorney or a collection agency?
The short answer to this question is that neither is, in and of itself, a better choice. As with any business relationship, find the person you trust the one you believe will do the best job for you.
There are however, some factors to consider that will help you decide:
1. Focus and Experience – You will get best results from someone who works collecting full time. If you hire an attorney, make sure it is an attorney experienced in commercial and collection law. You do not want the person who just did your will handling your collection account. Similarly, ask an agency to provide references, preferably of other companies in your industry.
2. Type and Volume of Collection – What is the average size of your accounts? How many will you submit each month? What have you done to collect yourself? How old is the debt? If you have multiple accounts, which are relatively recent and would likely respond to phone contact, then a collection agency will be your best bet. If you have a disputed claim that would likely wind up in court, then you need a collection attorney.
3. Fee Arrangement – Collection agencies often work on a contingency fee whcih means no money upfront with commission due when money is collected. Collection attorneys will often work on this basis as well. However, for complex litigation files, a retainer to the attorney is not only appropriate but necessary.
4. Need for Research – In this fast paced world, people move around a lot. Studies show that at least half of past due accounts placed for collection will need some sort of research to find contact information or to locate an asset. Make sure whoever you work with has the ability and the willingness to thoroughly research files and that research is included as part of the fee. Avoid anyone who wants to charge you extra fees for research.
5. Credit Bureau Reporting – If this collection tool is important to you, then a collection agency is your best bet. However, make certain that you understand why you want credit bureau reporting. It should be used as a tool to help collect your money, not as some sort of revenge for not getting paid. Some agencies and attorneys alike will make a hard push at the beginning of a file and then slap a record on a credit report and forget the file. You should make sure your agency keeps up the contact and keeps trying to collect your money. The effectiveness of credit reporting is over-estimated, and it is not without risk.
6. Legal and/or Post Judgment Capabilities – It is one thing to get a judgment, and quite another to collect it. NEVER hire a collection attorney who agrees to obtain a judgment but tells you that you have to collect it, or hire a collection agency to get your money. An attorney should be prepared to pursue a file for you until it is paid. Similarly, ask a collection agency if they have access to a network of collection attorneys and can work with them to bring the file to conclusion.
If you are lucky enough to find a collection agency with a strong relationship with a collection attorney, then you can get the best of both worlds – a team capable of handling all sizes and types of file, and bringing the benefit of telephone collection, research, legal expertise and post judgment collection to work for you.
What do you see as the pros and cons of using a collection agency or a collection attorney? Please leave your thoughts in the comments section.
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