Handing my tenant debt immediately to a debt collection agency is not my first preference. Myself, I would first report the debt to Experian, Equifax and TransUnion, and let the ding on the debtor’s credit work a couple of months before I gave it to an agency that can charge me a hefty commission.
Collecting tenant debt is significantly distinct from collecting other debts, including credit card debt. A collection agency represents you and your business, and you may be come to court should they violate the law. And, just as essential as any legal matters, is the way well they will collect your debt.
We have worked in the market for 12 years and would like to think that most collection agencies work hard, ethically and within the law. But, as in most industries, you will find those agencies that I consider to be renegades. They operate away from law, or right on the edge. Unfortunately, these companies get all the press, thus making all agencies look bad.
The fact from the matter is the fact that collection industry fills a vital need in the business world. Imagine if everyone could just stop paying their bills without repercussions. Do you think any bank would loan anyone money? And what might it do to the values of all products or services?
Here are what I consider the most important factors in hiring an agency to accumulate tenant debt:
o Has got the agency had any verified Federal Trade Commission (FTC) violations? The FTC regulates and investigates the collection industry; several violation would concern me.
o Is definitely the agency licensed in most 50 states? Although this is not essential to perform business, this query helps me sort out the firms that have a national presence and are large enough to meet the numerous state requirements.
o Will be the company bonded and insured? When the company fails to carry at least $1 million dollars of liability insurance, I would not allow them to have my company.
o Does the agency have membership within the American Collectors Association? Again, not required to function in the business, however it can show the amount of interest and participation the company has in their own industry.
o Does the company report debts to Experian, Equifax and TransUnion? This is among the biggest collection tools agencies use to motivate a debtor to pay their debt. Not all companies report.
o What sort of debt does the company focus on? The list of varieties of debt agencies collect is extensive. They may collect commercial or consumer debt. Consumer debt may become a car loan, credit card, utility bill, mortgage, medical bill, rent, etc. To accomplish a good job collecting tenant debt, an awareness of the terminology and also the company is critical. Very few nationwide collection agencies specialize especially in collecting this kind of debt.
o Does the company collect judgments as well as non-judgment accounts? Few firms that collect debt for landlords collect both varieties of accounts.
o Do they really work the take into account the life in the account? It is common for agencies to work the most recent accounts they have the hardest. As being an account ages, it really is deemed less collectable. Often agencies will work the account hard eight to ten months, and after that they rely almost solely on the credit bureau reporting to aid collect the debt. It costs a company more to possess a collector working older accounts; therefore expect a great agency to charge a greater fee. I desire a company that works well the make up as long since it is legally possible. If reporting the debt to the credit bureaus is sufficient to collect your debt, I can accomplish that effortlessly and inexpensively myself without having to pay any commissions.
o Does the company pre-judge accounts? In the market this is known as “rating the paper.” Amazingly, a minumum of one company which specializes in tenant debt brags that they rate accounts before they even begin collecting them. This enables the company to spend it’s some time and resources on debts they “believe” are the most collectible. This reduces their overhead, but does nothing to help a lot of their customers. Landlords that lose out are those that rent average apartments to everyday average people. Would you like to hire an agency that only concentrates on high-end properties, with well-to-do debtors? You would probably get about the same level of effort if you reported your debt to Experian, Equifax and TransUnion yourself, for much less money!
o Does the company accept collection accounts from independent landlords? At least one of the few nationwide agencies which specializes in tenant debt is only going to handle clients who own or manage no less than 100 rental units. This really is as they do not desire to be bothered by customer service calls from independent landlords.
o Will the company provide you with references off their landlords who use their services? References are essential so that you will may learn not just how well the company collects your money, but in addition the way they treat their customers. I have known of agencies that treated their clientele poorly when they called using a question or concern.
o Does the agency you interview boast regarding how significantly better they recover debt than others? Should they do, run! Run for a couple of reasons: If indeed they are doing collect greater than other agencies, how can they do it? Do they really threaten debtors and violate the Fair Debt Collection Practices Act (FDCPA)? This could increase the likelihood of your being dragged into a lawsuit. Likely their boasting is only a sales ploy, along with a cheap one at this. An overall average of methods much they collect means about as much to you personally as the things they had for breakfast. Plus, you may have no way to confirm their claims. The reality is that is no one can predict how well they can collect for you until they review your accounts and work on them for awhile. In fact, it may be a few years before you can realistically evaluate whether the company you hired was effective. This is why performing your research up front is so extremely important.
o Does the company charge a fee to take on your debtor file? Unless they can justify the charge, and it also seems as if they are a great company, I might continue searching for another company.
o What does the company charge for collecting your debt? This question comes last, as it is minimal important; but, it is often the initial question I am asked. After I am asked this question first, I know I am just talking to somebody that fails to know what else to inquire about. The reality is that you may locate a company that charges 30 percent of the things they recover. But, for 30 percent, they mgwisy limited inside the resources they can commit to collecting the debt. Would you rather visit a recovery of 30 percent of nothing, or 50 % of the $3,000 debt? Usually do not be fooled with a suprisingly low commission rate.
I realize that this is a very long list of questions and concerns. But, once you have done your homework and hired an agency, you can hop on with all the task of running your business and never be worried about it further.
A large amount of tenant debt is recoverable should you and also the agency you hire do your jobs. It may take some time to accumulate what you really are owed, but recovering lost profit at any point is icing on the cake.