When a client contacts us for the first time regarding an overdue account there is one question that the majority of them have, “How does this work?” It is a question that seems so simple, but for someone who’s never placed an account for collection, it is none the less important! Making the choice to send your customer to collections is a big decision, this blog is going to answer this question for you and hopefully help you decide!
The first step in the collection process is what we call inputting. This involves receiving the account from the client and either uploading in via spreadsheet or manually entering the account into the collection system. It also sets in motion two automated processes: a collection letter is generated and sent to your customer and a 30 day grace period is started. If the 30 days expire before your customer pays the account it is then forwarded to TransUnion and Equifax (the credit reporting agencies) and will remain on your customer’s credit file for the next 6 years. It should be noted that certain types of accounts from specific industries DO NOT affect your customer’s credit file.
As soon as the notice is sent to your customer an account agent begins to work on the file. At our office accounts are distributed by industry to our agents, this means that the agent working your account already has experience in collecting accounts similar to your own. The goal of the agent is to make contact with your customer and work with them to resolve the situation. This may take one call or numerous calls. Some accounts are paid in the short term, but some may take more time over the long term. It is important to note that the collection agencies’ goal is to collect as much as possible in the short term. By working with your customer our agents take a collaborative approach, even going so far as to helping your customer fill out any necessary paperwork. Sometimes though this isn’t enough to recover an overdue account.
There are always accounts that cannot be collected, that’s just the collection business; however, there are escalations if standard collection processes don’t work. The most obvious is to sue the account, but there are some things that need to be considered first, the balance of the account, the costs associated with legal action if your customer owns property. If you go this route and win the court will award you a judgment in which you can register against your customer’s property. Secondly, as mentioned after 30 days accounts are forwarded to the credit reporting agencies and remain on your customer’s credit file for 6 years. During the time the account is on your customer’s credit file it will appear as an unpaid collection account and may prevent them from obtaining credit like mortgages, car loans, credit cards, and lines of credit. Both methods may not get you paid immediately or even at all, but they do pose consequences for your customers if they don’t pay their account.
Whether or not the collection agency is successful there is something you can always rely on, you will be kept up to date by them. Throughout the collection process, status updates are given to you as they happen. All the money collected is sent to you at the end of the month along with a breakdown of the payments received. At the end of the day, it is still your account and a good collection agency will keep you updated on what is going on with it.
That, in a nutshell, is how the collection process works. It is a flow of information and communications between you, your collection agency, and your customer with the goal of getting paid. Agents then work with your customers to help them pay off their accounts and can escalate the process if your customer is unwilling to pay.