You rely on your clients to pay their monthly bills if you offer credit cards, loans or other types of financing for products or services. When clients fall behind on their bills or have outstanding balances, you have a right to the debt. Sometimes, businesses may use a collection agency to help collect on a debt.
According to Experian, a collection agency is a company designed to help you collect a debt and to recover funds after bills become past due.
What does a collection agency do?
There are two types of collection agencies. One type of collection agency purchases your debt. You typically sell the debt for much less, the agency pays you and the debt becomes a matter between the company and the debtor. Another type of agency collects the debt on your behalf. The agency receives a percentage of the debt, usually about 25 to 50% of the overall debt.
When should you hire a collection agency?
Most creditors do not hire collection agencies until after they make multiple attempts to collect on a balance. You should try for at least 60 to 180 days before you attempt to hire a debt collection agency. When you send the debt to the collection agency, remember that you will only receive a portion of the money. In some cases, however, it is better to receive a portion of the money than to receive no.
When it comes to debt collection, the agencies also have rules that they must follow when it comes to engaging with the debtor. However, a collection agency’s behavior towards a debtor does not reflect your company.
