When should you turn your account over to a commercial debt recovery agency?
One of the most frequently asked questions is when an account should be turned over to a commercial debt recovery agency. There is no simple or quick answer to this question, but there are several important factors to consider that can help answer this question.
First, there are no standard protocols or requirements a creditor must follow. Once a creditor identifies a delinquent debt they want to submit for debt recovery, they are free to do so at any time. Some creditors are under the mistaken impression that the law requires extensive evidence of debt recovery attempts and effort prior to involving a third-party debt recovery agency. This is simply not so. Remember, a creditor is free to handle their bad debt recovery however they choose and engage debt recovery agencies whenever they like.
Next, there are several common scenarios, stall tactics or warning signs that signal a debtor should be turned over to a commercial debt recovery agency. If a creditor has experienced one or more of the following scenarios, stall tactics or signs they should take action and begin the bad debt recovery process by sending the account to a commercial debt recovery agency.
issues an NSF check
breaks promise of payment
says “Do what you have to do.”
initiates a credit card chargeback
never calls you, you have to call them
demands documentation more than once
remains non-communicative / unresponsive
uses more than one excuse for nonpayment
refuses to commit to specific payment terms
tells elaborate story about securing financing
vaguely states “We’re doing the best we can”
indicates they have more important bills to pay
hints at a frivolous dispute when asked for payment
threatens they will file bankruptcy if you press them for payment
claims they won’t be able to pay until they collect their own receivables
blames nonpayment on macro issues, such as the economy, war, natural disaster, etc.
Unfortunately, this list is never-ending. The point is that if a creditor has experienced one or more of these scenarios, they should place their account to a commercial debt recovery agency without further delay.
Of course, creditors get into trouble when they continue to hope that if they allow more time, the situation will improve and the debtor will ultimately pay. With bad debt recovery, time is a key component. In other words, a creditor’s chances of successful debt recovery never improve with time. In fact, here are the statistics for debt recovery as time passes:
60 days past due 85%
90 days past due 73%
180 days past due 57%
270 days past due 42%
No creditor wants to pay a commercial debt recovery agency to have their accounts collected, but when they run into these scenarios they need to take decisive action to recover their money and mitigate their loss.
Direct Recovery Associates established our low contingent rate structure based on this important function of time or the age of the receivable. Our fee structure is such that the age of the receivable determines the contingency fee. For example, if we receive an account before it is 60 days old and we collect it, our fee is only 15%. If the account is less than 120 days when you submit to us, our fee is 20%. Of course, if we are unable to collect, there would be no fee. Our fee structure is designed to motivate creditors to turn their bad debt recovery accounts over to us at the first sign of trouble and not wait until it’s too late and the debtor has gone out of business or disappeared.
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