Collection Agency Qualification & the Selection Process

Many licensed collection agencies are required to carry bonds in their state as well as Errors and Omissions insurance.  Errors and Omissions insurance protects both the client company against errors made by the collection agency.

A reputable collection agency may be a member of The American Collectors Association.  The Commercial Collection Agency Association represents some of the most prestigious collection agencies in the United States.  CLLA members are the only third party collection agencies certified by the Commercial Law League of America. The CLLA is focused on creating an organization that focuses on improving the services member collection agencies offer to trade creditors.   The CLLA works to elevate the standards of the industry by providing educational, promotional and administrative services for its members.

As a general statement, do not base your decision to use a particular third party collection agency based on these facts or factors:

• Do not select representation based only on the third party offering the lowest rate.  Often, you get what you pay for.
• Any documentation they provide about their success rate in collections.  If it sounds too good to be true, it most likely is too good to be true.
• Do not sign an agreement that accounts will automatically be placed for collection once the account is more than xx [lets say 120] days past due.  Each collection is different and rules of thumb about when to turn an account over to a third party are ofen counter productive.  This is especially true with a customer with whom your company would prefer to maintain a positive working relationship.

© 2010 by Michael C. Dennis.  All Rights Reserved.  Excerpted from "Credit and Collection Handbook" by Michael C. Dennis

Edited by Michael Zininberg