Hiring a Debt Collection Agency

Why Should I Hire a Debt Collector?

You’ve sent several invoices, but the vendor has not paid you for shipments. Perhaps this has happened repeatedly. As a business owner, there comes a time when you must accept that the vendor will not pay you – and you must consider hiring a debt collection agency to back up the seriousness of your unpaid invoices.

Debt collection agencies exist to pursue these unpaid debts on behalf of business owners. Most people are familiar with debt collection agencies who might pursue individuals for unpaid medical or credit card bills, but business owners can hire these agencies to pursue other businesses that refuse to or cannot pay invoices that have been sent to them. Rarely do individuals or businesses need much more pressure than a letter from a debt collection agency – these businesses help back up the severity of unpaid bills or loans.

However, every country heavily regulates debt collection agencies and when they can be used, and the United States is no exception. The Federal Trade Commission regulates debt collection agencies for the US, defining what messages from a debt collection agency constitute legal communication, versus what crosses the line into abuse or harassment of a consumer. Because this is such a sensitive area for businesses, it is important to understand how to find legal and professional debt collectors, and when to use them best.

You want to conduct your business in good faith and maintain good relationships with suppliers, vendors, and consumers. However, in some sad cases, these relationships go sour as your good will is abused. Here are some signs that you might need to hire a debt collector to help you get money for your unpaid goods or services:

  1. If the customer breaks two or more promises of payment, or repeatedly fails to pay on the first invoice or ask.
  2. The customer’s phone has been disconnected, they do not respond to emails or emails bounce back, and/or they do not respond to mailed letters.
  3. The customer consistently asks for documentation and insists they have not received it. This is a common delay tactic.
  4. The customer breaks payment rules laid out in your contract.
  5. Your customer refuses to pay and will not resolve the problem with you.
  6. Your customer insists that they will pay the bill, but after 60 to 90 days, has still not paid their invoice or bill.
  7. Your time is being wasted communicating with an unrepentant or unresponsive merchant.
  • Make sure the agency is licensed in all 50 states. Although some local laws in some cities or states do not require nationwide licensing for debt collection agencies, this is very rare. Even if your state offers exceptions, hire a debt collector that has full, 50-state-wide licensing. This is especially important if your business deals with vendors or merchants in other states.
  • Verify the agency’s legitimacy. Make sure they are bonded, licensed, and follows all Fair Debt Collection Practices Act.
  • Ask about their insurance. It is important for debt collection agencies to have insurance to cover any damages or losses that occur during the debt collection process. If a consumer feels that the agency acted in bad faith through harassment or otherwise, then insurance protects the debt collectors and your business.
  • Make sure the agency will keep you up to date on their progress. Ask how the debt collection agency will communicate with you regarding the debts. This can help you determine if their methods are effective or not. Ask them to send you supply collection reports, as well.
  • Ask about “skip tracing.” Too many unscrupulous individuals or businesses try to skip town as a way of avoiding debt collectors. “Skip tracing” is a method using multiple databases across multiple states to locate a debtor who leaves no contact information if they leave town.

If you run a business and there have been complaints from multiple merchants or vendors regarding when and how they receive invoices, consider downloading our free invoice template to use one template across the board that gets sent out at the same time every month. If you continue to have problems with unpaid invoices, we recommend that you consult an attorney and hire a debt collection agency.