Many creditors refer debts they are unable to collect to third-party commercial collection agencies. If you’re one of those creditors, you might be asking yourself how it is that the collection agency may be able to collect even after your in-house collection efforts failed. To the extent they are successful collecting on your behalf, these agencies are successful for the reasons or based on the ideas identified below:
Compromise: The collection agency may be open to discussing a payment compromise with the debtor where you were either not willing or not able to make this concession.
Focus: The collection agency has one job. The creditor company’s credit team have competing and ongoing tasks and duties. The collection agency can focus 100% of its time and energy and expertise on interactions with the debtor company.
Litigation Threat: By the time an account has been placed for collection, the debtor recognizes that being sued is the next step. Some debtors will pay the collection agency to avoid litigation.
More Aggressive Collection Tactics: A third-party collection agency may use a more aggressive collection approach.
More Objectivity: In interactions with the debtor, the creditor may be less objective and more emotional… which the debtor may perceive to be a sign of weakness. Collection agencies have no emotional involvement in the collection process.
Potential Wider Implications: The debtor may pay because they are concerned that your company will report that their account has been placed for collection --and this information may prevent the debtor for qualifying for open account terms from other creditors.
Psychological: Poor paying customers are accustomed to the back-and-forth of interacting with their creditors. In other words, the debtor knows what to expect. However, most debtors have limited experience with collection agencies, and the resulting uncertainty and doubt can result in payment.
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