Most people believe that a collection agency simply makes phone calls and reports debts to a credit rating agency. Certainly telephonic contact is an important part of the process. Although I contend it is overrated, credit reporting can perhaps assist with recovery.
So what else does your collection agency do?
Collection agencies have specialized tools to locate your customers and their assets. I spend a good part of my day looking for people and their assets. “Skip tracing” is the research process in the credit and collections industry. The term comes from private investigation firms who would look for information on people who had “skipped town”. To me, skip tracing involves finding new information (address, phone, email, assets) of customers who have moved.
Why is skiptracing important?
How important is skip tracing to the collection process? Lexis Nexis, a leading provider of research tools for law, government and collections estimates that 35% of delinquent debtors move annually. Also, 50% of files placed for collection will need some sort of skip tracing.
Collection agency research might reveal a name change due to marriage or divorce, new phone number, or a new job. They will research a file under consideration for possible legal action to make certain there are assets (job, bank account) to justify legal action.
Does skiptracing cost more?
Your collection agency should provide skip tracing as part of their services. Although some agencies charge a higher contingency rate for collections involving skip tracing, you should not have to pay an additional fee for it.
What sources are used to skiptrace?
Services like Lexis Nexis and Transunion offer automated services collection agencies use. However, these databases use public information. If a person must have something in their name – a utility bill, driver’s license – anything. If not, chances of finding them with this method is next to nothing. Still, it is a good first step.
Collection agencies may also can review credit reports not only to obtain contact and asset information, but to get an idea of the debtor’s ability to repay the debt.
Often a collection agency will review court and land records. Solid research drives the strategy. As an example, we once selected a file for litigation. The debtor had a good job and owned a home. However, she had multiple judgments liens against her, more than the value of her home.
Skip tracing becomes an art when you take it to the next level and review the debtor’s social media profile. You would be amazed at how much information can be obtained from Facebook, LinkedIn or a simple Google search.
I love working puzzles, and quality skiptracing is just that. If your collection agency is not doing this for you, you are missing a huge piece of the puzzle.