The third-party debt collection industry returned some $45 billion to creditors and other clients in 2013, according to a study released today by ACA International. The report, based on a survey and other statistical analysis by Ernst & Young, is the latest in a series of comprehensive industry studies.
ACA began its economic impact studies in 2004 when it commissioned PriceWaterhouse Coopers to conduct a thorough analysis of the role third party collections plays in the broader U.S. economy. The report released Tuesday is the fourth since then, providing a fascinating look at the evolution of the ARM industry over the financial collapse, recession, and recovery.
From my seat as a debt collection attorney, the concept of credit scoring and skip tracing are very closely related. The main reason for this determination is that many vendors provide both credit scoring information and skip tracing data. In fact, this information is often provided as a suite of products from the same vendor, for example, offering a FICO credit score and a current address. As we will see, this information might be very useful in certain instances.
Whether you are new to the concept and use of credit scoring or a seasoned veteran, do you really know what type of score you are really getting or what attributes are utilized to arrive at the score? A FICO score is created by Fair Isaac Corporation and is generally the most widely used credit score allowing lenders to make their credit decisions. The credit scores range from 300 to 850 and are calculated based on information found on a credit bureau report. However other scores are not based on credit attributes at all; some may be based on behavior patterns such as how you have paid a lender in the past while others may be based on age, demographics, and property ownership, among other factors.
The picture that many people have in mind when they think about the stereotypical debt collector is that of the mustache-twirling, hard-hearted scoundrel of melodrama infamy, threatening to throw widows and orphans into the street because the rent is overdue.
And while itís tempting to portray these individuals as dastardly villains out to wreck lives and historically some of their behaviors have been less than admirable itís important to remember one fact: Nobody is forced to borrow money.
Ultimately, if you owe a debt, itís because you made the choice to borrow money. Your lender made that loan, or offered the credit line, contingent upon your promise to pay it back.
Your creditors do have a right to their money, and a debt collector is simply trying to reclaim what is legally and ethically owed by you.
Advocates for lower-income families need to be aware that many debt buyers are suing the wrong people, and for the wrong amounts.
Over the past decade, banks have increasingly moved away from collecting defaulted credit card accounts in-house to a model of selling off bad accounts for pennies on the dollar to debt buyers. The accounts are sold ďas is,Ē pursuant to contracts in which the banks state that the debts may not be owed, the amounts claimed may not be accurate, and documentation may be missing.
Itís human nature that many customers will not pay you until they are reminded to. Many people find this a tricky and often uncomfortable conversation to have, but the longer the debt remains unpaid the more difficult it becomes to collect and the more at risk you are of being caught with a bad debt.
With bad debt and cash flow issues cited as two of the main reasons most small businesses fail itís vital that someone is keeping an eye on yours.
Your customer has taken you to the end of your tether. Theyíve used all the excuses in the book not to pay you and played for time at every turn. Enough is enough, itís important you get your money, but you have to focus on running the rest of your business too. Time to turn to a debt collector for help, but what should you be looking for?
PREPARE: Review the paperwork on the debtor before making the call. Know the history of the account, credit record, the promises kept/broken. Have all records in front of you, ready for reference.
ATTITUDE: Adopt a straight, professional business-like attitude. You have a contract, you delivered the goods, money is owed, and you have a right to expect payment. Never let it become personal. Don't yell or raise your voice; and NEVER swear. Don't threaten; legal action is your recourse.
CONTACT: Make sure you're talking to the right person. Don't let the individual brush you off with "You'll have to talk to the bookkeeper." Identify the person who will pay the bill. If you can't get through after several calls, tell the secretary that you know your calls are being screened. Indicate the purpose of your call and if necessary give deadlines.
The term "collection agency" can cause worry and make your blood pressure increase. While debtors frequently view debt collectors in a negative light, many collectors are simply doing their job. Often a debtor can talk to the collector to try to work out a payment arrangement that is agreeable to the collector and you. Collection agencies must adhere to federal law when attempting to collect a debt.