How to Hire a Debt Collection Agency

Posted by Marilyn Miller on June 16, 2014  /   Posted in Uncategorized

Congratulations! You have decided to focus on your uncollected revenues and get help to collect them. But, there are many agencies advertising in your area. How do you choose the right collection agency?


An obvious first step is to ask others in your industry. A solid recommendation from someone you respect is worth a great deal. 

Additionally, here are some factors to consider:

1. Licensing and bonding – Licensing and bonding requirements for consumer debt collection (business-to-consumer) vary by state. Licensing usually requires a bond to protect funds the agency collects before they disburse them to you. Some states even require attorneys to obtain a special license if they are in the business of debt collection. A simple web search will help you find licensing requirements for your state, usually the Department of Banking or Consumer Affairs. Commercial debt collection (business-to-business) is generally not licensed.

2. Type of compensation – Agencies are paid in one of two ways: 1) Contingency – no fee upfront and agency is paid a percentage of the monies recovered; or 2) flat fee per file. A contingency fee is based on the aging of the debt (i.e, how long payment is overdue). If you do not want to pay any money up front, then contingency rate may be best for you. If you have a great deal of “small, low hanging fruit”, then the flat fee approach may be better. 

Do not focus on rate alone. Ask what services are included with the rate. Research is very important – is it included in the rate or is there any extra charge for it? How about legal fees? 

3. Experience and References – How important to you is it that your agency understand your business? Have they worked for companies like yours? Can they provide references? 

4. Training and Certifications – Has staff been trained on fair collection practices? If you are medical provider, make sure agency is HIPAA compliant. Make sure they have procedures and systems in place to protect your customer data.

5. Staff and Location – How many employees? Is it important to you that the agency be local?

6. Bilingual – Can the collectors communicate with your customers?

7. Research – This is very important. These days people move around a great deal and change their phone numbers often. You agency should be willing and able to track people down. NEVER pay additional for research. It should be included in the fee.

8. Approach and Personality – Are you hoping to collect the money due you while still retaining the customers, or are the customers written off for good? Make sure the agency is in sync with your approach to business.

9. Credit Bureau Reporting – Is it important to you? Consider this

10. Legal Capabilities – Does the agency have access to a network of attorneys, if needed?



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