Debt Collection Agency or Letter Service: Which Do You Want?

Posted by Marilyn Miller on March 20, 2019  /   Posted in Uncategorized

Debt collection involves a number of activities. Some debts are simple to collect, while others are more difficult.

More often than not, debt collection involves more than simply sending letters.

Yet, yesterday I received an email from a collection agency in another state promoting a very low fee to send 4 letters. To get the lowest rate, you have to submit a larger number of files. You pay the per file fee upfront. No phone calls are made for the fee, and all funds are sent directly to you. Sound great, no?

Let’s do the math

A small dental office sends 100 files to collection. The fee is $ 8 per file, so $ 800 is paid up front. Remember, you pay the fee whether or not the letters work, but if it does work, your only expense is the initial fee.

Twenty debtors pay from the letter, and you recover $1,000, more than your original investment.  You ask the collection agency what will happen to the other files, and they quote you the rate for real collection, which will be the standard contingent rate of anywhere from 35-50%. The new contingent rate is in addition to the initial fee, which is, of course, non-refundable.

Let’s say the total value of the money owed to you in those 100 files is $ 10,000. You have recovered 10% of the money owed to you. Can your business afford to lose that $ 9,000?

Remember that 4 letters are likely sent monthly, which means that your contingent rate will likely be higher, as debt collection rates increase as debts age. The debts get staler, people move and incur more debt. Trust me, the longer a debt is out there, the more likely money owed to you will be used to pay other bills.

You should be sending collection letters yourself. Your collection agency should be contacting debtors by mail and phone, and researching for new information.

Effective debt collection is about so much more than letter writing. The choice is yours.

Consumer Rights and Creditor Rights: A Debt Collector’s View

Posted by Marilyn Miller on March 18, 2019  /   Posted in Uncategorized

Consumer rights and creditor rights are not mutually exclusive.  As respects collection of a delinquent debt, a consumer has the right to be treated respectfully. A consumer has the right to obtain complete and accurate information on the debt. Consumer rights are protected by the Fair Debt Collections Practices Act, or FDCPA a law put in place to shield consumers from abusive and deceptive practices by third party debt collection agencies.

The FDCPA is a very good law.

Consumers need to be protected from unprofessional collection agencies. You need only google “collection agency scam” to find a host of horror stories. Some of the news reported is not actually done by collection agencies, but by people pretending to be collection agencies to scam people by pretending to be the IRS, and so forth. Nevertheless, there are bad players among debt collectors – just as there are bad players in every industry. There are also many reputable collection agencies working hard to return money back to business owners and keep the economy moving.

Creditors also have rights, including the right to be paid for the work they do.

None of my clients want to work for free. Would you want to work and not be paid? Creditors have a responsibility to protect their right to be paid by communicating to their credit customers upfront the terms and conditions of their payment policy.

An effective debt collector stands at the intersection of consumer rights and creditor rights.

They are an advocate for their client – the creditor. The goal is and always should be to get the creditor paid. However, if consumer rights are protected, and the debt collector can clearly and professionally communicate with the consumer, chances of success are high.

Consumer debt collectors must be professional yet persistent. There really are instances where people have suffered a life even that leave them unable to pay. There are also instances when people do not take their responsibility to pay for services seriously. A good debt collector knows how to tell the difference.

So when does the process break down?

It breaks down when one or more of the parties neglect the rights of the other party. If a debt collector is abusive, chances are a consumer will take legal action. When a consumer does not respond to numerous requests for payment, then chances are the debt collection will progress and could impact the consumer’s credit rating or put the assets of the consumer in jeopardy. If a creditor is careless with their credit practices, and if they do not work in tandem with their collection agency, it will become difficult to get the best results.

Respect, professionalism and most importantly, communication are essential for all parties. Collection agencies must adhere to the law, and work with consumers to set up payment arrangements. Consumers should realize that when a debt is referred for outside collection, it is time to do something – even if that something is letting the agency know they cannot or will not pay. Creditors should trust and support their collection agencies, and give them all the tools they need to succeed.

Maine Collection Agency: What They Can and Cannot Do

Posted by Marilyn Miller on March 15, 2019  /   Posted in Uncategorized

This post is not about the Fair Debt Collection Practices Act and the rights of consumers to be protected from abusive debt collection practices. Certainly, a debt collection agency must be in compliance with the law, but there have been many articles written on that subject. So, if you are reading this article looking for information on how to stop collection calls, stop reading now.

However, if you are a small Maine business owner or entrepreneur and you are not getting paid by customers, and want to hire a collection agency, this post will help you get a realistic idea of what you should and should not expect.

Here are some things your Maine collection agency  can (and should) do for you:

Help locate customers who have moved – A big part of debt collection is finding debtors and their assets. You should never pay an additional fee for research as it is an integral part of the collection process.

Give you ideas on how to improve your credit practices – The best collection is the one you can make in house without having to send to a third party.

Save your time and let you focus on your business while they focus on getting you paid – Certainly you should make an effort to recover money, but after a while it simply does not make sense to use productive time chasing bad debt. Also, debt collection agencies have special tools and training.

Advise you on information needed to assist with the collection and maximize results – Ask your collection agency to advise you on the process, and ask them to tell you what information they will need to get the job done.

Here are some things your collection agency cannot (and should not do):

Change the financial situation of your customers – If someone is in a cash crunch, you may not be able to get all your money at once, and you should be realistic and flexible with your agency if they ask you to accept small payments or a settlement. A good debt collector is a skilled negotiator, and they will work hard to get you paid, but you may have to be patient and be paid over time. Remember that most agencies are paid on a contingency basis, which means they only get paid when they get results for you. So, if they ask you to take a settlement or payment plan, it is because their experience tells them it is best option.

Ruin someone’s credit – We get it. It makes you angry when you do not get paid. However, credit reporting is only one tool and recent changes in the law lessen the impact of single item anyway. So,  one item reported to the credit bureau will not ruin anything. Focus not on being angry but on the goal of getting paid.

Charge fees that are not in your contract or prohibited by law – If you want to recover collection costs or charge interest on past due accounts, you must have a customer contract that allows it. In addition, you must be in compliance with state laws. Some states allow recovery of all or part of your collection fees, others do not.  Certain rates of interest are considered by law usurious, or excessive. A good customer contract will be your best friend. Contact your attorney today to get one.

Collect debts that are legally uncollectible – Each state has a time limit, or statute of limitations that governs how long a debt someone can be held liable for the debt. Also it is illegal to collect a debt that is under the protection of the bankruptcy court. So, do not wait to long to send accounts off for collection!

Collect debts from parties that are not liable for them – Once again, the need for a customer contract is important.  When you are providing product or service to a business, especially a new business, you should ask for a personal guarantee. A personal guarantee means that a business owner takes personal responsibility for debt of their company if they go out of business.

Similarly you cannot hold heirs responsible for a debt of a deceased relative. However, if there is an estate with assets you can make a claim against the estate in an attempt to recover.

In the end, it comes down to communication with your Maine collection agency. Use your agency not simply as a commodity but as a trusted partner. It is perfectly fine to have high expectations, but your expectations must also be realistic.

Collection Agency: What to Expect While They’re Collecting

Posted by Marilyn Miller on March 11, 2019  /   Posted in Uncategorized
So, you have hired a collection agency. What comes next?

You will notice right away that you have more time since you no longer have to chase after delinquent customers. And, you should let the collection agency do their job. Step out of the process. You no longer need to bill customers in collections, and if they contact you, refer them to the agency.

When can you expect some money?

This question is impossible to answer, as it depends entirely on the number of accounts, type of accounts, and complexity of collection involved. What you can expect is periodic updates on the status of your accounts. In fact, before you hire an agency, discuss how and when they will report account progress to you.

Be realistic. You know what you did to collect from our customers before sending them to collections, and you know that debt collection is a process. Some customers will pay soon after being referred to collections, while others will take time.

Remember that a collection agency works on a contingency rate basis, which means they charge no money up front and get paid if (and only if) they collect for you. Just as you have entrusted the debt to the agency, they have put their trust in your business, and the validity of the debts you place with them. It is a leap of faith for both sides.

It is not as much how quickly a collection agency returns money to you, but rather what actions they take and how long they persist in the endeavor. A collection agency works the file for 30 days, slaps the debt on a credit report, and then moves on to the next file will produce limited results.

Once again, ask your agency about their process before you hire them. How are they different?

Have new information? Pass it along!

Research is a big part of debt collection. Over half of collection files will need some sort of research to find new information, such as new phone number or address. The research process is called “skip tracing” and it is ongoing. Collection agencies have access to databases for research but some of the best information comes from social media or “buzz” in the community. If you learn something new, pass it along to your collection agency, even if you are not sure it is significant.

As an example, a customer once told me that she learned, through Facebook, that a customer was expanding his business and hiring new people. The debtor had been telling me business was slow, and I was able to share his own words back to him, and convince him to pay what he owed.

Another time, a customer shared with me that a judgment debtor had a new job. The debtor had promised to pay when he went back to work, and we contacted him and set up a payment plan. 

So what can you expect? You can and should expect to have a business partner who respects your business and works hard to get you paid. You should expect a give and take. If you participate in the process and keep the lines of communications open, your collection agency just might exceed your wildest expectations.


Collection Agency or Attorney: Which is the Best Fit?

Posted by Marilyn Miller on March 08, 2019  /   Posted in Uncategorized

Both a collection agency or attorney can help recover bad debt for you. How to decide which is the best fit?

When you decide to get some outside help to recover bad debt for your business, you want to make sure that you select a partner that will get you the very best results. I am often asked how the services of a collection agency differ from the services provided by an attorney.

Whether you select a collection agency or an attorney to help you will depend on the kind of files you want collected.

If you have a good number of smaller uncontested files and want a focused, ongoing collection effort that involves communication with your customers by letter and phone, then a collection agency is your best bet. Do you want delinquent customers reported to credit bureaus, or need some research done to find customers who have moved? A collection agency is a good option here too.

A file involving a dispute that will probably result in litigation is best for an attorney. An attorney demand letter may be just the right thing to get you paid an avoid litigation, and is usually inexpensive. What happens if the letter does not work?  We recently received a file that had not responded to an attorney letter. The debt was 1,000 and the letter cost our customer $150.00. paid up front. The attorney said he would need an hourly rate to continue working the file. We got involved and called the business every day until he paid the bill.

You also need to determine which files make sense to litigate? Are there assets to attach? Decide the cost vs. benefit of legal action.

I get calls all the time from companies who have a large disputed case they want us to handle. I do not mean to say that collection agencies cannot handle disputed files – they can. However, if the only reason you are hiring a collection agency is to avoid paying an attorney retainer, then you may be making a big mistake.

If you want to hire a collection agency, find an agency with experience in your industry. Yes, you should look at the agency’s rates, but understand what is (and what is not) included in the rates.

If you want to hire attorney, ask them about their process if the initial demand letter does not get a payment. Do they follow up by phone? Do they have ability to research and find assets? Ask the attorney Are they going to handle the post judgment as well as the court hearings? Finally, find an attorney that understands collection law. The attorney who handled your divorce or drew up your will may not be suitable.

There are times when either option can get the job done, and you can make a decision based on the collection partner you think you can work with in the long term. Your best bet is to find a collection agency that has a relationship with experienced collection attorneys. That way, you get all the benefits of both approaches. It is one thing to go to court and get a judgment, but another thing entirely to collect on a judgment.  The right partnership between collection agency and attorney will deliver judgments that collect!

Should You Be Embarassed If Your Customers Don’t Pay You?

Posted by Marilyn Miller on March 01, 2019  /   Posted in Uncategorized

When small business owners do not get paid, I understand it when they get angry or discouraged. When you extend credit to customers, you perform a service or provide a product based on trust. Your customer promises to pay, and you trust them. So when they do not pay you, it is a betrayal of trust, and it feels terrible.

Should you be embarrassed when you get stiffed?

I am told that business owners do not want to talk about bad debt in their business because they are embarrassed about it. I wonder what good it does to feel that way. In reality, you are in good company. A payment practices study from 2016 found that 93% of businesses experience late payments, and 46% of credit sales are paid late.

Feeling embarrassed might cause you to ignore or hide the fact that customers are not paying you. Unpaid and uncollected accounts receivables are a leading cause of small business failures. So hiding from the problem because you are embarrassed about it only hurts your business.

Is it your fault if customers do not pay you?

My mother used to say that you cannot change how people behave, but you can change how you react to them. People do not pay what they owe for many reasons, and while you cannot ever be certain who is going to pay you, you can take steps to protect your right to be paid for the work you do.

Make an informed decision on who gets the privilege of credit terms. Save your best terms for your best customers. Require a deposit from new customers and if the first transaction goes well, perhaps you can offer better credit terms the next time. Keep monitoring customer credit lines, and adjust when necessary.

Communicate your terms clearly in a customer contract before you do the work. Stay on top of your accounts receivables and have a plan to pursue overdue customers. Do not be afraid to hire a collection agency for any debts over 90 days.

Even if you do everything right, you still may get burned at times. But if you are proactive and diligent with credit customers rather than hiding from the problem, you will improve cash flow to your business, and that is something that will make you proud.


Collection Agency Cold Case Files: Can You Get Paid on Older Debts?

Posted by Marilyn Miller on February 27, 2019  /   Posted in Uncategorized

A collection agency works with a contingency rate. This means that you pay no money up front. Your collection agency makes money when they get you paid. Therefore, many collection agencies want only the newest files, the lowest hanging fruit. These files are the easiest to collect. I certainly have some “fresh” files in my book. However, what about older files, files that are one or more years old? What about court judgments?

Statute of limitations may limit recovery.

The statute of limitations  is the maximum date that you can legally collect a debt. In Maine and in many states it is six years. However, each time your collection agency gets a payment, the statute begins anew.

One way to lengthen the statute of limitations is to litigate and obtain a court judgment. Judgments are normally good for between 10 and 20 years. So, if your customer has no assets today, they may have assets a few years from now. A judgment gives you the right to attach those assets.

How does a collection agency find assets?

A collection agency performs a service called “skip tracing” to locate information on debtors and their assets.  When I skip a debtor, I put pieces of a puzzle together. I use some specialized subsciption services, but also search the internet, including social media sites, court and land records.

What about bankruptcy?

Some people may seek protection from collection with the federal bankruptcy laws. Once you learn a customer has filed for bankruptcy, you must let your collection agency know immediately. You and your collection agency must immediately stop all contact and efforts to collect. In some cases, the debt will be discharged, which makes the debt not collectible, and there is no chance for recovery. Sometimes, the debtor will enter into a repayment plan and you will get some or all of your money over time. In other cases, the debtor will not comply with the law, and the case will be dismissed. If a case is dismissed, you are free to pursue the debt once again.

So when can you recover a “cold case file”?

It all comes down to two factors. First, are assets available? There has to be something to get. Secondly,  your collection agency must be willing and able to dig into an older file. Some agencies only want the newer, fresh files, so make sure to ask.

It is going to cost you more money – higher contingency rate- to collect an older file. Accept the reality that you have nothing and that anything you recover is gravy.

Debt Collection and the Impact of a Customer Contract

Posted by Marilyn Miller on February 25, 2019  /   Posted in Uncategorized

Debt collection is greatly enhanced when there is a written agreement to verify how the debt came into existence. Similarly, our ability to get the best results can also be hindered in the absence of a contract.


Here are some real life examples of recent collections, with names changed to protect the innocent (and the guilty!).

Oral contracts are open to interpretation.

Oral contracts are valid in Maine and in many states, but when there is a dispute, a “handshake agreement” quickly becomes a “put up your dukes” situation.

I have a file on my desk between two tradesmen who have a long history of doing business together and actually are (or were) friends. They each have a story about why the money is or is not owed. My guy claims he is owed $ 700.00. while his buddy claims the same sum is due, referring to an oral contract between the two parties. The two sides of the dispute are diametrically opposed, causing a great deal of angst and no resolution in sight.

The “he said, he said” problem is 100% avoidable. Get it in writing!

Stop giving interest free loans!

My client placed a substantial year-old debt with me for collection. She had been adding interest and late fees after the debt was 30 days past due. She was not happy when I told her that without a contract, she could not legally charge interest unless the customer had agreed in advance. Had my customer had taken a few minutes to send an email to her new customer with payment terms, including interest on late balances, and asked to email back consent, we would have a simple contract and be legally able to add interest.

You cannot simply advise on your after-the-fact invoice that you are charging interest, as many believe they can. Why? The customer could argue, correctly that they never agreed to the finance charges.

Think about your mortgage, your car loan or credit card documents. A bank never provides interest free loans. Why should you?

Getting “personal” can save the day.

We were asked to collect a debt in excess of $ 50,000 from a company that had not paid our software developer royalties. When we approached the debtor company, their first defense was to tell us that the company had been dissolved, and had no assets. We found this information be to be true, but also discovered that our client had the forethought to obtain a personal guarantee from the business owner.

A personal guarantee means that the business owner pledges personal assets in case the business is unable to pay. We were able to take an action against the business owner, who owned two homes, and a good income. We were only able to take this action because we had the personal guarantee – without it, we would have been stuck.

Taking the time before a transaction to communicate your payment terms contractually may mean a little effort on your part, but could make a big difference down the road.




Hiring a Debt Collector: Five Perks for Your Business

Posted by Marilyn Miller on February 22, 2019  /   Posted in Uncategorized

Hiring a debt collector is a smart move for a small business. Certainly, having a relationship with a good small business debt collection agency will bring money back to your business and help you grow. There are, however, more benefits you can receive from hiring a collection agency.


As a small business owner, you are busy wearing many hats. It is very easy to lose focus on the money owed to you when you are working to gain new business and service your customers. A debt collection agency’s job is to focus, everyday, on your accounts receivables and on getting you paid.

Time – Collecting money takes time. All business owners need more time. Let a commercial debt collector help you so that you can spend your time growing your business.


The internet, especially social media, provides a good deal of information on people. However, debt collection agencies have specialized tools and can take research to the next level. They specialize in finding people and their assets. The process is called skip tracing and it is critical to successful debt collection.

Conflict Resolution 

Customer disputes can be a big distraction. When you outsource your debt collection, you get yourself out of the middle. The best debt collector will help separate valid disputes from bogus ones, and get you involved as needed.


Find an agency that can assist you with improving your credit practices. Look at your business debt collector as your consultant or coach when it comes to your day to day credit interactions with customers. Your collection agency understands small business credit and can help you structure payment plans that give you a competitive advantage.

Hiring a debt collector can send a message to your customers that you are serious about getting paid. Time after time, we have seen delinquent customers sent to collections get serious, pay their bill, and become a customer again.

Hiring a debt collector is hiring a valued business partner. You must work along with them to get the best results. You will be happy you did.

Credit Bureau Reporting: How it Impacts Debt Collection

Posted by Marilyn Miller on February 20, 2019  /   Posted in Uncategorized




Credit bureau reporting and debt collection are not the same thing. Reporting delinquent debts to the credit reporting agencies Equifax, Experian and Transunion is one of the tools that can be used to help collect a debt. Many people believe it to be the most important thing a collection agency can do for them, but it is only one tool. And, in my opinion, many collection agencies rely too heavily on it. Let me explain.

Not getting paid stinks. It is an insult and a betrayal of trust. Although it is a business issue, it feels personal. You are angry and call a collection agency to help recover the money owed to you. The first thing you tell your collection agency is that you want the debt reported to the credit bureau because you do not want your customer to “get away with it”.

There is a huge problem with that type of thinking. Your customer has already gotten away with not paying you. You have nothing – zero. So instead of focusing on getting back at the customer, focus on recovering as much as you can.

This is where the collection agency comes in. Ask your collection agency what they will do to recover for you. If credit bureau reporting is the first thing they tell you, it likely means that is pretty much all they are doing. Perhaps they are sending a letter and making a few calls, but after a month or so, the debt is parked on your customer’s credit report and nothing new happens.

So does credit reporting actually help collect a debt?

It can motivate your customer to pay the bill so as to avoid the impact to their credit score. Also, there is a chance that even if your customer does not care about their credit score today, they will at some point in the future. Federal and state laws vary on how long debts can be reported, but the “future” could be years from now though. How long do you want to wait? What is your collection agency doing in the meantime?

I was speaking with a small business client this morning regarding a person who owes $3,200. My client asked me to report the debt. I said I would be happy to do so, but I told her that the person already has a 450 credit score with many small collections. One more is not going to make much difference, and it has not motivated this individual to come to the table on those other debts. I suggested we keep working to reach her, and get her into a payment plan.

In my experience, most people sent to collections are not primarily concerned with their credit scores.

It may be an issue, but it is not the most important issue. The most important issue, the one we hear again and again, is the  inability to pay. Therefore it makes sense to work with people and get them into affordable payment plans, rather than punish them for something that may be totally out of their control. Even for those customers that intentionally stiff you, your focus should not be on getting even with them. Your goal, and the goal of your collection agency should be to recover as much money as possible. It can be done without credit reporting. I know – I have been doing it for 14 years.

As of July 1, 2017, credit reporting agencies must  remove many debts that did not have key identifying information on such as social security number and date of birth. Going forward, if do not have complete information on customers, the credit bureaus may be unable to accept reporting. The impact of medical debt on a credit score has also been minimized So an active plan for recovery becomes even more important.

Credit reporting and debt collection, therefore, are two distinct things. One is a tool that may or may not work, and the other is a process – an action word. The actions you and your collection agency take will make the difference in getting you paid.

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