Debt Collection Agencies: How To Choose The Right One

With UK debt collection agencies (DCAs) collecting £1.75 billion on behalf of clients in 2014, it’s clear that outsourcing your debt recovery processes to experts can get impressive results. However, choosing the right agency could not be more important to secure leading return rates and protect both your customer relationships and brand reputation. With around 400 DCAs operating in the marketplace, making that choice can be a difficult and lengthy process. To help, here are five key considerations to bear in mind…………

Accreditations are a must
It may seem obvious, but ensure the agency has the correct accreditations in place and is a member of the Credit Services Association (CSA). If using legal representation, check that the solicitors are members of the Solicitors Regulation Authority. It may be tempting to opt for a ‘no financial risk’ or ‘cheap’ debt collection service, but you may find you’ve placed your organization at unnecessary risk. The importance of appointing a professional and credible agency cannot be underestimated.

It’s also worth checking that the DCA does not have any adverse press on Consumer Action Group websites. You’ll always find some disgruntled debtor postings, but ensure there are no major issues that may find their way back to the Citizens Advice Bureau, Financial Conduct Authority and Credit Services Association.

Check out financial stability
Financial stability is clearly a key area of concern. A DCA experiencing financial difficulties can often enter administration without clients having any prior knowledge of the situation. This may result in debts not being collected, debtors claiming they’ve paid when they have not and clients being left in the dark over just what has and hasn’t been paid. It’s advisable to request the DCA’s accounts for the last 3 years and check credit history for judgements, as well as obtaining references from current clients, backing up any information provided directly.

It’s also useful to look at current client spread, identifying the percentage of total turnover the top 3 clients represent. If more than 70%, seek assurances on the strength of these client relationships. Finally, ensure all collections made are separated into individual client accounts. Find out the size of the DCAs “suspense account”, as this holds unallocated funds that are not assigned to a client. A large account usually indicates information inaccuracy issues.

Great people and processes deliver a great service
Great service and results start with great people; therefore a site visit to a potential DCA’s premises is a must. Evaluate whether operations mirror clients’ brands and how professional and busy the employees and their environment appear. The DCA will be in direct contact with your customers, therefore it’s imperative you feel confident your brand and customer relationships will be protected. Meeting the Operations Managers, looking over collections systems and listening to a range of collection calls can assist with judgement.

Check employees are supported by the right processes. Viewing typical collection reports, letters, strategies (flow charts), MI and performance stats from current clients can all help create an overall picture of the DCA, its ethos and practices. In addition, understanding training and personal development programmes can help confirm that compliance and operational training is up to scratch. Evaluate how important your business will be to the DCA. There can be concerns over the level of attention and activity your debt will receive in a large multi-client agency, choosing a medium sized agency can reduce this risk. Last but not least, in the unlikely event disaster strikes, examining the disaster/recovery policy, including back up of data can put your mind at rest.

Technology savvy or lagging behind?
The DCA’s team should be equipped with the right tools to do an effective job. Checking they’re supported by the right technology and processes to deliver results is advisable. We’d suggest evaluating the available reporting suite and asking whether bespoke reporting can be provided. Also, check whether the website offers a client portal, which is an easy and convenient way for you to view accounts and confirm service levels as and when desired.

Offering a multi-channel approach to customer contact and payment can improve recovery rates, so ask how many and which customer payment methods are accepted. Finally, data protection is a serious consideration with severe implications in the event of a breach, so ensure you closely examine the computer security policy and compliancy in this area.

Collections strategies that get results
Successful collection of debt whilst treating customers fairly is ultimately what you’ll be looking for your chosen DCA to deliver, therefore understanding just how successful a potential DCA is at collecting debt is perhaps of upmost importance. As well as understanding current collection rates, make sure you compare and benchmark against performance stats for a similar industry. An understanding of which type of debt profile the agency excels in e.g. prime/trace & collect etc. is important to ensure their strength closely matches the type and age of debt you’re looking to recover. Comprehensive, regular performance monitoring is a must-have.

In terms of ensuring customers are treated fairly, one of the key things to understand is how the DCA’s collectors are remunerated. If the weighting is too heavily on bonuses, the danger is heavy handed and aggressive techniques will be deployed which may damage your customer relationships and brand reputation, and in severe cases lead to regulatory investigation.

Lloyd.

Want to find out more about our customer-centric approach to debt collections? Why not visit our debt recovery pages.