For the average company, a $10,000 uncollected invoice means that roughly an additional $100,000 in sales must be created to make up for this lost revenue.
If you are dependent on consistent cash flow, like most businesses today, not getting paid on time can be especially problematic for you. With every dollar counting in these turbulent financial times, businesses need the help of a collection agency to get their past due customers to pay more frequently than ever.
Unfortunately, the odds are against you if you’re giving debtors an easy out of paying by placing them with an unlicensed collection agency. When hiring a debt collection agency, using a fully licensed collection agency is crucial if you want to actually get paid.
The Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debt, was created so that the Federal Government could regulate the actions of “consumer” collection agencies.
It costs almost $500,000 in cash and credit to be properly licensed, bonded and insured across the country. If an agency is not compliant it means that they don’t have the credit or capital to get it done, don’t have the background to pass the scrutiny or simply don’t care about breaking the law. Regardless of how long you have used your current agency, what great rates you may be offered, or how often you have to use an outside party to collect a debt, is an unstable at best or unscrupulous at worst company one you really want to partner with?
In addition to being costly, the licensing process for a collection agency is rigorous and time consuming. All too evident when considering that fewer than 5% of debt collection agencies in every jurisdiction of the United States are fully licensed.
While it requires a bit of due diligence on your part to locate and hire a legally compliant collection agency, the consequences to your company of using an unlicensed one are numerous.
- LICENSING – IT’S THE LAW: Operating without a license is a felony in some states. In addition, your customer can use the agency’s lack of licensing to avoid paying their outstanding debt.
- LICENSING – PROTECTS YOU FROM A POTENTIAL LAWSUIT: Unlicensed activity by a collection agency is open it to devastating law suits filed by either the state or the consumer. As a creditor, you can be sued right along with them.
- LICENSING – MAXIMIZES RECOVERY: For fear of being reported to state regulators, unlicensed agencies will not and cannot be as aggressive when collecting your accounts. And if a debtor threatens to report the unlicensed agency to state regulators, they
- LICENSING – PROTECTS YOUR REPUTATION: Your customer can file complaints with the Attorney General in your state and theirs, the Better Business Bureau, and also the owners and officers of your company if the agency you hired is not licensed in their state. While agencies that collect debts from consumers without a license face severe penalties and legal issues, these negative ramifications could affect your professional reputation and hurt your bottom line.
- LICENSING – SAFEGUARDS YOUR MONEY: A licensed agency is up to date with all laws, regulations and licensing requirements, which often include bonds to protect the creditor. After all, having an agency collect your money is only half the battle; collecting your money from the agency is the other half.
With all of the benefit that partnering with a licensed agency provides, is hiring an unlicensed one really worth the risk?