Collections or debt collections involve the process of recovering debts from the borrower, who failed to repay and recovering payments on accounts that are past their due date. Although the collections process is about the recovery of outstanding debt, the question is “How do collections work in today’s world?’
How do Collections Work?
Collections are usually done by a debt collector who works for a creditor or with an outsourced third-party collections agency. When accounts are given to a debt collector or a debt collection agency, the agency is responsible for contacting and recovering the debt from the defaulter. They have to strictly follow the Fair Debt Collections Practises Act (FDCPA) and other debt collection laws specific to that state while collecting the debt.
Read more about Debt collection in California, Debt collection in Nevada and Debt Collection in Maryland
In the current age, there are many debt collection agencies out there that help several businesses recover debt from their customers. So the question, ‘How do collections work in an agency?’ needs to be answered. Debt collection agencies operate on the information of the debtor on file. The method and technique may differ from industry to industry. This information they operate on includes Name, Address, Phone Number, to contact the debtor. A debt collection agency performs many functions including:
- Debt collectors send a Debt Validation Letter, a requirement of FDCPA, to the debtor in question. The letter contains details of the total amount of debt and conditions and timelines of payment.
- Phone Calls: Collectors contact the debtors by making phone calls to the debtor’s personal or work phone number or both. They are only allowed to contact you between 8:00 a.m-9: p.m.
- Skip Tracing: If the debtors leave the registered address or if they have left without any trace or information, Skip tracing is employed to track down these defaulters for recovery of payment.
Many collection BPOs offer first-party collections and third-party collections services. The first-party collection can be done within the organization, where the employees of the company in question are in charge of and manage delinquencies typically less than 60 days old. An early intervention and recovery process helps creditors reduce their roll rate and the number of accounts they send to bad debt. First-Party can also be outsourced to agencies such as First Credit Services, who operate on behalf of the business and organization.
Third-party collections is when the original creditor outsources the accounts written off as bad debt to a third-party organization. It is generally outsourced at a later stage in the debt collection process, generally after 30, 60, or 90 day periods. This late-stage collection process helps to reduce the total amount of bad debts written off.
The process of debt collection can be taxing as there are numerous crucial elements involved at each stage in the process. Another factor to consider is that with an in-house or digital strategy of debt collection, not only are the recovery rates low but, they can also potentially harm your brand. Outsourcing the process to a debt collection agency will help you, overcome these challenges and have a positive brand experience.
Many agencies like First Credit Services offer streamlined services for debt collections by employing an omnichannel strategy, unlike traditional debt collection agencies. With over 25 years of experience in the industry, they ensure professionalism and build and maintain good relationships with your valued customers.
Besides letters and phone calls, First Credit Services utilizes modern technology to target millennials who are able to receive emails and pay off their balances online. They utilize automated software that works on machine learning to help optimize engagements with debtors who owe money by contacting them at the right time along with the right method of communication. First Credit Services promises you a transparent experience that maximizes the amount of debt collected and recovered. Along with First-Party Services and Third-Party Services, they also offer EBO (Extended Business Office) and Business Process Outsourcing services. They offer debt collection services to a variety of industries including Commercial Lending, and Health & Fitness Industry. Contact First Credit Services for your debt collection and accounts receivables management needs at firstname.lastname@example.org today!