We all know the relevance and importance of debt collection agencies on the businesses as they improve the cash flow. The businesses hire the debt recovery services to recover the debts that are unpaid by long period by the debtors and the accounts turned delinquent. Now, if you are thinking to hire a debt collection agency, make sure they are licensed.
What can happen if the agency is not licensed? Let’s see…
For any average company, an unpaid invoice means that roughly the same amount (mentioned on the invoice) sales must be generated to compensate this revenue loss. If your business gets deep impact by lack of consistent cash flow, like the most businesses these days, not getting the payment can be problematic to run the organization. With every dollar counting in the current stormy financial times, the businesses need help of debt collection agency to get their customers paid more often than ever.
Sadly, the entire scenario will go against you if you are giving the debtors chances to pay off their debts through an unlicensed debt collection agency. While hiring a debt collection agency, you must select a fully licensed agency if you truly want your payment. The FDCPA or Fair Debt Collection Practices Act restricts the debt collectors from using unfair, abusive or deceptive debt collection practices. This act was created so that the Federal Government can control and monitor the actions of the collection agencies.
It needs almost $500,000 in cash and credit for proper licensing, insurance or bonding across the country. If an agency fails to stay compliant it means that they do not have the capital or credit for the job getting done. Moreover, they do not have the background to pass the scrutiny or do not care about complying with the law. Irrespective of how long you have made use of your current agency, you may get new and lucrative offers and how often you should use an outsider party for debt collection agency.
Additionally of being costly, the licensing process of a debt collection agency for debt recovery process is time-taking and rigorous. It is also evident that fewer than 5% of the debt collection agencies are fully licensed in every jurisdiction of the United States.
While it needs a little due diligence on your part to hire and locate a legally compliant debt collection agency. The consequences to the company of using an unlicensed debt collection agency are endless.
Why a Licensing Agency?
IT’S THE LAW: Operating without a license is a felony in some states. In addition, your customer can use the agency’s lack of licensing to avoid paying their outstanding debt.
PROTECTS YOU FROM A POTENTIAL LAWSUIT: Any activity by an unlicensed debt collection agency is always open to get lawsuits filed against it by either the consumer or the state. As a creditor, you can also be sued along them.
MAXIMIZES RECOVERY: The unlicensed collection agencies will never be aggressive in their debt recovery service attempts while collecting the delinquent accounts in fear of being reported to the state regulators. If a debtor threatens to make reports about an unlicensed agency to state regulators, there could be strict actions against the agency.
PROTECTS YOUR REPUTATION: A legal file or lawsuit can be made against you in the state if the agency you have hired is not licensed. The customers can file a lawsuit with the attorney general of the state and BBB or Better Business Bureau against the officers and owners of your company. While agencies that collect debts from consumers without a license face severe penalties and legal issues, these negative ramifications could affect your professional reputation and hurt your bottom line.
SAFEGUARDS YOUR MONEY: A licensed agency is up to date with all laws, regulations and licensing requirements, which often include bonds to protect the creditor. After all, having an agency collect your money is only half the battle; collecting your money from the agency is the other half.