Collection Agencies and Payment Plans

Posted by Marilyn Miller on January 27, 2020  /   Posted in Business, Uncategorized

Collection agencies make a number of mistakes, but refusing to accept a payment plan should not be one of them. We recently collected a file that was almost 6 years old, meaning that it was almost beyond the statute of limitations. Why were we successful? We offered her a payment plan. The consumer told us that the previous collection agency refused to allow her to make monthly payments. We set up an auto monthly payment with her credit card, and sent her a written confirmation. She was so overjoyed that she offered to send our client a letter praising our efforts.

Many consumers become overwhelmed by the total amount of a debt, but if you break it down for them, it often becomes manageable. It is important to remember some simple rules about payment plans.

Document. Document! DOCUMENT! Memories fail us.

It is important to detail of the plan in writing and make sure both parties sign to indicate their agreement:
  • Amount of money to be paid, number of installments, number of installments (Example: “…will pay the sum of one thousand dollars ($ 1,000 USD), payable in 10 equal installments of 100.00 each)
  • When, where, and how each payment is to be made – exact details. (Example: Payments should be made payable to {Company Name} must be mailed to {Company Name, Full Address} so that payments are received by the 15th of every month.) Also, don’t forget that this agreement should list whether interest will accrue on unpaid balance.
  • Consequences for default on agreement – Will default void the agreement? Will you charge a late payment fee? Will the file be sent to a debt collector? Make sure to specifically detail what happens if the terms are not met exactly as agreed. 

There are also several ways you can use payment plans to enhance your cash flow and make it easier for people to pay you. 

1. Obtain a larger down payment up front with small back end payments.

2. Consider an online payment portal. Ours has increased payments by 30%.

3. Accept all forms of payment, including PayPal, Apple Pay, Venmo, or even chickens. Whatever it takes!

4. Set up automatic credit/debit payments.

Keep card on file (VERY important to get a signed consent to use the card in the case of any dispute)

5. Consider payment coupons 

Coupons are very old school, but some people like them. Some people do not have bank accounts or a credit card. Some people will not pay a bill online or over the phone. They will be more inclined to pay if you send a monthly statement and envelope.

6. Offer an incentive for early payment of balance.

Be smart about your payment plans and make sure your collection agencies are too. Remember that people are busy. Make it easy for them to pay. Convenience is key!

Hiring a Collection Agency: Five Key Considerations

Posted by Marilyn Miller on November 30, 2018  /   Posted in Business

Hiring a debt collection agency could be a great move for your small business. But how do you know if you are hiring the right agency for your needs?

Here are 5 key things you should look for before you hire a debt collection agency:

1. Licensing, bonding and reputation – For the collection of consumer debt, state laws vary as to requirements for licensing and bonding. Make sure you know what your state requires before you begin your search. For the collection of commercial (business-to-business) debt, a license is usually not required. For any type of firm, you should check their online presence and ask for references.

2. Fees – Collection agencies are paid in one of two ways: flat fee or contingency. Each method has its pros and cons, depending on your business. The lowest fee is not always the best fee. What will the agency do for the fee they charge you, and do you believe that will be sufficient to get results for you?

3. Research – People move around a great deal these days and the ability (and willingness) of an agency to find people and their assets is key to success.

Ask a debt collection agency what sorts of research tools they have. Never pay an additional fee for research. It should be part of any collection compensation plan.



4. Credit bureau reporting – As we have stated before, we believe credit bureau reporting has its benefits and risks, and you should know about both before you start working with a collection agency. Reporting a debt to credit bureaus is only part of the process. What will the collection agency actually do to reach out to your customers and convince them to pay?

5. Personality – Do your collection goals and your company personality fit with the agency? How will they represent you to your customers? Do they have experience working with companies like yours and can they provide references? Know your goals and communicate them to the agency.

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