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Debt collector agencies work in a multiple way; some work as middlemen, collecting clients’ aberrant debts, which are 60 days past and squaring them to the original creditor. Debt collection agencies receive a good percentage from 25% to 45% from creditors depending upon the nature of collection and amount of debts. They are also called business collection agency working for various delinquent debts such as credit card debt, medical debt, personal loan debt, business debt and other bills and debts. There is of course smart ways to avoid a commercial collection agency but sometimes you are compelled to hire a professional agency for debt recovery. For many companies’ delinquent accounts are the biggest worry for draining resources and time. That said, you can’t hire any debt collection agency and need to evaluate correctly which one is better for you. Do a proper research More often the best collection agency is the specialized one. They charge more but they have a great success rate. Some agencies are specialized in securing funds in large companies, and some work for small businesses. It depends on the debtors you are dealing with. Verify the agency legitimacy The rules and regulations for debt collection vary in different states and localities. You need to ensure to check the legitimacy of debt collection agency in your state or locality. The debt collector agency must be bonded, licensed and adhered to the local authority and of course Fair Debt Collection Practices Act. “Skip tracing” is required In many cases debtors skip town, or states, and this is a terrible problem to recover debt from them. To fight against this delinquent practice, distinguished collection agencies use what is called “skip tracing”. It means the agencies have access to the databases of debtors that allow them to locate the debtors even if they don’t leave any address. This is critical for those debtors who ignore you even after you call them personally. Insurance for agency There are many instances when debt collection agencies use aggressive tactics to take out the debt from debtors. If a debtor finds enough evidence to make it as the agency acted in bad faith, the debtor can sue you. You need to make sure you are not liable for hiring the company, so find a proof of insurance from your collection agency in case your debtor takes you both to the court. The insurance is known as “Errors and Omissions Insurance” and it protects renowned agencies as a shield. Compare fees and possible cost Once you finalize your agency, you need to look at the fee. Different agencies charge for their services in a different way. Now, you need to understand the best possible cost you can bear and the one that is perfect for you. Some agencies charge flat fee that is associated with “pre collection” small amount. The flat fee is offered early in the debt collection procedure. The common method is “no collection, no fee” model, which is typically 35-45% charge on the total debt recovery. About the Author Erle Roth is a financial advisor for different debt collection agencies, working for last 15 years in this field. He has an extensive knowledge about business collection agency, money laundering, small business taxation, commercial collection agency and others.
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