Debt recovery can be a tricky business. Companies lose millions of dollars every year because of debts that are never recovered. This is particularly true for companies that prefer keeping good reputations and maintaining long-standing customer relationships, over recovering what they are owed. A debt collector often uses a merchant account collection agency business model to help recover outstanding debts owed by creditors.
This is a major reason why companies prefer selling their debts to collection agencies once their clients default on payments. The debt collection industry has relationships with various high-risk merchant account service providers and acquiring banks that special in accepting credit cards when accepting payments for these outstanding debts.
But these debt collection business agencies often struggle to recover the money too. In some cases, these debts are very old and the collectors have no original credit documents to trace the debtors. Other times, the information provided is inaccurate because the debt has been sold by a collector and not by the original creditor.
Many collection agency businesses face the tough task of recovering debt because consumers are protected by the Fair Debt Collection Practices Act. This is a law that prevents merchant account collections agencies from using illegal means to obtain payments.
For instance, the law prevents a collections agency from using foul language, making abusive threats, or letting neighbors know that a client is indebted.
When a collector violates a debtor’s rights under the FDCPA, the debtor has the right to do the following:
- File a complaint with the Consumer Financial Protection Bureau (CFPB).
- Tell a debtor to stop every means of communication.
- Use the debt collector’s violations as leverage to negotiate a reduced settlement.
- Sue debt collector for damages.
Debt Collectors Need to Prove It’s Yours
Under the Fair Debt Collection Practices Act, someone who borrowed money has the right to disagree with a debt, until it is proven otherwise.
Within 5 days of getting in touch with a debtor, the collections agency is required to provide the following things:
- The amount owed.
- Name of the original creditor.
- A 30 days ultimatum to dispute the validity of the sum owed.
- If the debt is not disputed within 30 days, the collector has the right to assume it is legal and proceed with the recovery.
- If the debt is disputed within 30 days, the collector must send proof that it is real.
- A written request asking for the name and address of the original creditor must be provided within 30 days.
Once a debt is disputed, a collections agency is expected to stop all communication until the debt can be confirmed. This confirmation needs to be seen by the debtor before communication can resume.
Collection Agency Merchant Services – Industry & Shady Practices
Collection companies want to recover their debts as quickly as possible. This is the reason why most of them find it difficult to always work on the right side of the law. Since these agencies are desperate and under pressure, they often engage in shady practices to recover their debts by any means necessary.
The collection industry is riddled with poor ethics and a lack of accountability. It is the reason why the Federal Trade Commission (FTC) publishes a list of banned debt collectors to serve as a warning to other agencies.
Recently, the FTC filed charges against 30 debt collection companies for illegal debt collection practices and banned 63 other agencies from ever doing business again.
Why Collection Companies Struggle to Recover Debt
Consumers wield plenty of power under the Fair Debt Collection Practices Act. Some consumers have been known to abuse this legal privilege by falsely lodging complaints to cancel their debts or collect 1000’s of dollars in compensation from collectors for harassment.
Following up on customers for payments can be a frustrating process. But this does not mean that debt recovery is an impossible task. Most times, the reason why collection agencies struggle to recover debt simply comes down to a lack of strategy or the lack of proper payment processing solutions. A solid debt collection merchant account should accept online payments through a robust payment gateway when processing payments for their clients.
When dealing with repayments, speaking less and listening more to a client is very important. Regardless of the situation, collectors cannot afford to lose their tempers or threaten clients. Clients can frustrate a collector by delaying payments if they are not handled carefully.
A debt recovery agent should always be friendly with clients and keep conversations short as well as straight to the point. The agent should never be unkind to a borrower struggling to pay off a debt. An irritated debtor can make things difficult for an unconcerned agent looking to claim payment as quickly as possible.
Working Out the Best Way to Recover Payments – Collection Agency Merchant Services
A debt collection business should always politely ask why payments are late and provide gentle reminders after invoice due dates have not been honored. If payment has not been made, work out a favorable option for you and the client. An agent should listen carefully to what the client has to say and offer the best options available.
A collector should increase the firmness of follow-up communication as time goes along. The first point of communication can be a friendly phone call and then an email that is written in a positive and helpful tone. By the time the third collection letter is sent, the tone should be more direct and firm. An agent should always remain professional and avoid being aggressive or offensive in any correspondence.
As a debt collection agency, agents should not just be left to recover money by themselves. Too many accounts should not be assigned to one person. Designating a debt collections team leader and providing training, support, and the right motivation to get the job done is always key.
A company in the business of pursuing payments should know the rules and regulations that govern how it should go about recovering debt. A good grasp of these laws helps collection agents from overstepping their boundaries or by taking advantage of their clients or twisting the law.
A collection agency merchant account is an absolute necessity when working in this space. Collectors should always run credit, trade, and reference checks before purchasing any debt. This allows the agency to realize if a debt is worth pursuing or not.
Before making contact with a delinquent customer, a collection company needs to learn everything about that customer. Copies of invoices, contracts and any other information from the original creditor to help the agent communicate professionally and smartly must always be on hand.
When talking to a customer about paying back a debt, take notes about everything discussed. This also includes important things said by the client, in case a debt dispute comes up in the future. All this information should be kept on a system and updated with additional details as the need arises.
SecureGlobalPay specializes in merchant processing for collection agencies of shapes and sizes. Our state-of-the-art payment gateway allows our customers to reduce their chargeback ratios to help provide the absolute best overall payment processing experience for their clients.