Questions About Debt Collection

Here Are Some Answers to Frequently Asked Questions About Debt Collection

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Regardless of the size of your business, it’s frustrating to face overdue payments. You’ve upheld your end of the transaction and have your own bills to pay. You’ve called, emailed, and sent letters to your delinquent customer but to no avail.  

Here, you may consider partnering with a collection agency like Summit A*R. You can learn more about us from our website to understand how we can help you recover your revenue. We are highly effective and work on a contingency basis where we only get paid when you get paid. What’s more, we follow professional, ethical, and diplomatic collection practices to preserve your reputation and the customer’s dignity.

If you’re unfamiliar with the collection industry, then you may have several queries. You can get your questions answered by contacting Summit A*R through phone or email. But first, read the following FAQs:

1. What is a Collection Agency?

A collection agency helps lenders or creditors recover debt from accounts that are past their due date. Usually, businesses hire a collection agency after their own attempts to recover debt have failed. However, it’s best to a partner with a debt collector as soon as possible because debt grows harder to recover with time.

2. How Do Collection Agencies Recover Debt?

Most collection agencies are good and reputable businesses. However, some may use shady tactics like threats, robocalls, and harassment. These tactics are frowned at by the law and ineffective in the long run. At Summit A*R we boast twice the national average recovery. We achieve this with the following methodology:

  • Kindness and respect: Our 23 years of experience suggests that debtors respond better to kindness and respect than threats and aggression. At Summit A*R we follow the “P.H.D. Philosophy” (Preserve Human Dignity). This means that we treat people with dignity. Usually, debtors are happy to clear their dues when presented with manageable payment solutions.
  • Demand Letter: Often, an official letter from a commercial collection agency demanding payment is enough to motivate a customer into clearing their dues. The name of a reputable debt collection agency carries weight with customers.
  • Skip Tracing: Sometimes, customers ‘skip’ town to evade creditors. We have a skip tracing department that’s more successful than those of other collection agencies. It’s led by a private investigator and has state-of-the-art resources that can locate most people and their assets.
  • Credit Bureau Reports: While most people are willing to pay their dues, some are hesitant to do so. Such debtors usually change their minds when they realize that their credit report can be adversely affected. Unlike your in-house collection department, we can report delinquent customers to the three major credit bureaus.
  • Full-Service Litigation: Because of the resources and time required, legal action is usually the last resort for a debt collection agency. At Summit A*R after exhausting all avenues we can perform a cost-benefit analysis of pursuing legal action. If litigation is feasible, we will present it to you as an option. However, if you decide not to go down this road, your account will be returned to our credit recovery department for further action.

3. What’s the Difference Between Consumer and Commercial Collections?

At Summit A*R we offer both, consumer and commercial collection services. The differences between the two are significant. Consumer collection is the process of collecting a debt owed by individuals to businesses. This can be credit card debt, medical debt, wireless chargeback collections, and more. For example, our bad check recovery service from an individual to you would fall under consumer debt collections.

There are two major reasons why consumer debt collection agencies should avoid unethical practices. Aside from being bad for karma, unethical practices can hurt the reputation of all parties involved. At Summit A*R we’re proud of our A+ rating by the Better Business Bureau (BBB). This score is only given to businesses in the top percentile of BBB’s ranking system.

To maintain the score, we must keep complaints to a minimum and follow the highest standards. As a client, unethical business practices can also impact your reputation and standing in the business community. That’s why it’s important to partner with an ethical consumer collection agency.

Consumer debt collection is also governed by the Fair Debt Collection Practices Act (FDCPA). This federal law limits the behavior and actions of third-party debt collectors. Agencies violating the FDCPA have been blacklisted and heavily fined.

On the other hand, commercial collection is the process of recovering debts owed by one business to another. For example, it could be a payment owed by a business to a small supplier. While commercial collection practices aren’t bound by the FDCPA, it’s still in your best interests to partner with an ethical agency that refrains from using aggressive tactics.

This is because a misstep from a commercial collection agency could damage your relationships in the business community. You could lose customers and other businesses may hesitate to work with you. Moreover, like individuals, businesses also respond more positively when treated with dignity and respect.

4. What Are Some Common Terms in the Collection Industry?

There are several terms used in the collection industry that you may be unfamiliar with. Here are some of the most common ones:

  • Accounts Receivable (AR):  This is the balance of money owed by a customer to a business for goods or services delivered. Outstanding AR is when the balance is past due.
  • Delinquent Customer/Payment: A delinquent customer is a debtor who’s failed to make their payment on the due date.
  • Bad Debt: Bad debt is defined as debt that’s considered unrecoverable. When a company has exhausted all options, they may cut their losses by writing off the debt. The longer you wait to recover a debt, the greater the chances that it will become hard to recover. At Summit A*R we have recovered some particularly difficult debts over the years. Give us a call to explore your options.
  • Recovery Rate: In simple terms, this is the percentage of the payment recovered from a delinquent customer. At Summit A*R we boast twice the national recovery rate thanks to our ethics, experience, professionalism, resources, and skill.

These were answers to some of the most commonly asked questions in the collections industry. We hope that this information will be useful to you in your debt recovery efforts. Please feel free to get in touch with Summit A*R for more expert advice from our collections team.