Understand When to Hire: Collections agencies are typically used when your own efforts to collect an unpaid debt have failed. This could be after several months of unsuccessful attempts.
Do Your Research: Not all collection agencies are the same. Some specialize in small businesses, others in certain industries. Look for an agency that matches your needs. Check their reputation, reviews, and history.
Check Licensing and Accreditation: Collection agencies need to be licensed in many states. Check to make sure any agency you're considering is properly licensed in your state and any states where your debtors reside. Agencies may also be accredited by professional organizations, which can offer another layer of assurance.
Understand Fees and Pricing: Collection agencies generally operate on a contingency basis, which means they charge a percentage of the debt they successfully collect. Rates can vary widely, from 20% to 50% or more, depending on factors such as the age and size of the debt.
Consult a Lawyer: It can be a good idea to consult with a lawyer before hiring a collections agency, to ensure you understand the legal implications and any potential liability.
Review Collection Practices: Make sure the agency follows ethical collection practices and adheres to the Fair Debt Collection Practices Act.
Sign a Contract: Once you've selected an agency, you'll need to sign a contract that outlines the terms of your agreement, including fees, the length of the contract, the methods the agency will use to collect the debt, and other factors.
Transfer Debt Information: Once the contract is signed, you'll provide the agency with information about the debtor and the debt. This can include contact information, the nature and amount of the debt, and previous attempts to collect the debt.
Remember, hiring a collections agency should be a last resort, and it's crucial to ensure that they adhere to the best practices to maintain your reputation and avoid potential legal issues.