Economic Impact of Third PArty Collections
Wednesday, February 15th, 2012
The Association of Credit and Collection Professionals (ACA International) recently commissioned Ernst & Young to take a closer look at the economic impact that third party collectors have had. The results of the survey were released earlier this week, giving us a clearer depiction of collectors’ contributions at the national and state levels. A complete listing of the findings can be found by clicking here or clicking the image below, but here are some of the findings that caught our eye.
Collectors in all 50 states combined to recover a gross amount of $55 Billion for a range of industries that includes healthcare, higher education, financial institutions, small businesses, and non-profit organizations. North Carolina based agencies, like PRC, were able to recover over $800 Million.
The focus of the study was much wider than just how much debt we were able to collect upon. While there are those who associate third party collectors with economic hardship, the industry has shown to be responsible for providing close to 4,000 jobs in North Carolina alone while also contributing $27 Million in tax revenue at the State and Federal levels.
Finally, we have routinely made a point to highlight PRC’s relationship with the great people at SafeChild. We were delighted to learn that there are so many collectors in the state with a strong focus on giving back to the community. Ernst and Young reported $1.6 Million and over 10,000 volunteer hours have been contributed to charitable causes by NC collectors.
The take away from the survey results should not only be the economic impact of our industry but also its commitment to citizens and the community at large.
Posted in blog | No Comments »
Cease & Desist Orders Are Not As Beneficial To Consumers As They Might Think
Wednesday, January 25th, 2012
First and foremost, we at PRC wish you all a happy and safe new year. In our continued goal to educate and improve our industry, we are highlighting the consequences of cease and desist letters actually have on debtors. The following information comes from a recent article found on insideARM.com, submitted by Phillips and Cohen Associates. While C&D orders are the right of a consumer, many of them do not fully grasp the breadth of their actions and are focused solely on stopping communications from collectors. The fallout can commonly manifest itself in a few ways that do more harm to the consumer than help.
1. With the lines of communications cut, creditors can still enlist legal action in order to try and collect upon the consumer’s debts. The relief that a consumer had thought they would gain from the cease and desist letter is short lived as a lawsuit can create a whole new set of problems for the consumer.
2. In cases where a lawsuit might not make sense, collectors can still report the account to the credit bureaus as an unpaid account. This will appear on the debtor’s credit reports, and is one of the worst possible marks to have on these reports. It can stay with a consumer for seven years after being reported.
3. The Cease and Desist letter is only applicable to the agency that receives the letter. If the creditor places the account with another agency or sells the account to a debt buyer the phone calls that the debtor was so eager to avoid can start all over again.
Despite it being the consumer that sets these events in action, none of these scenarios favor them. In the cases listed above, when the communications stop, the headache begins. What consumers should take away from the list is that no matter what a radio or television commercial might tell them about debt communications, just because the calls stop doesn’t mean the debt goes away with them. Collectors are sill their best ally in fully resolving debt issues.
Posted in blog | No Comments »
Creditors Play an Unrecognized and Powerful Role in the Debt Collection Process
Friday, December 2nd, 2011
While typically our blog posts contain original content, this recent article by Stephanie Eidelman on Forbes.com was too good not to share with our readers. Stephanie Eidelman is publisher of insideARM.com, a website for accounts receivable management professionals. She’s watched the media coverage of collectors, and the dynamic between creditors and collectors, unfold for over ten years. The article, see link below, is a good reminder of the “partnership process” between creditors and agencies as well as the role that creditors play in the accounts receivable and collection process. Thanks again to Stephanie for a fantastic article. We hope you enjoy it as much as we did.
Posted in blog | No Comments »
The Rapid Evolution of an Industry
Tuesday, October 18th, 2011
In previous blogs, we have established the need for legislative change to our industry. The laws currently on the books have become outdated as a result of the revolution in communications that we have witnessed over the past decade. As a result, the leadership in our indsutry has produced a Blueprint for Change.
The plan includes updates to the the Fair Debt Collection Practices Act (FDCPA), Telephone Consumer Protection Act (TCPA) and Truth in Lending Act (TILA). A few of the finer points of the Blueprint include:
- Collectors of credit card debt- the Blueprint calls for changes to the validation notice to include the name of the original creditor and to provide an itemization of the fees and interest applied by a collector after it is placed for collection or by a debt buyer after it is acquired.
- Amending TILA to improve debt documentation – requiring that original creditors maintain consumer account information for no less than seven years from the date of charge-off, which is consistent with the amount of time a debt can be reported on a consumer’s credit report.
These simple changes will help collectors provide documentation to consumers, allowing a more responsive process regarding their disputes. This includes the amount of the debt, to whom the debt is owed, or the party responsible for paying the debt. The flow of information created by updating these laws is truly beneficial to all parties involved.
Posted in blog | 3 Comments »
A New Era in Debt Collection
Wednesday, July 6th, 2011
Now more than ever, the debt collection industry finds itself at a crossroads. Next month, collectors will begin to be regulated by the newly formed Consumer Protection Agency (CPA). Previously, our industry was under the jurisdiction of the Federal Trade Commission (FTC). The FTC served the role of watchdog but never had the power to create rules or regulations. The CPA, on the other hand, will wield that power.
The difficultly comes from the public opinion of the debt collection industry. Like most other booming industries, there are those in our business that have been overzealous or might have acted in an unethical manor. Their actions affect us in a negative way and are preventing us from having access to the communication tools of the 21st century.
The overwhelming majority of collection agencies, ourselves included, operates in a completely legal and ethical manner and encourages strict sanctions against those that do not.
An article from Sunday’s New York Times, gives the account of a Minnesota debt collector who deals with the barrage of insults that she is subjected to everyday. Unfortunately, this is a common occurrence in our industry. This is no doubt a result of the negative attention generated by unethical collectors. We understand that we are not the Salvation Army; we deal in items of a sensitive nature and are not asking for sympathy. We ask only for the respect due to those performing a necessary, valuable service and the updated tools to continue doing so.
Posted in blog | 3 Comments »
Maintaining a Positive Attitude is Crucial for Success
Wednesday, March 23rd, 2011
Henry Ford said “Whether you think you can or whether you think you can’t, you’re right.” We all understand this axiom and the value of a positive mental attitude. In the collection industry we hear “no” (and much worse) so consistently, that it can be quite challenging to maintain the positive attitude needed for success.
Even the best collectors hear “no” far more often than they hear “yes”. Collectors can easily fall into a pattern of learning to expect non-payment before the call even gets underway. This is one of the worst habits a collector can form. If a collector thinks the debtor is not going to pay, then odds are greatest that the debtor will not pay.
It is so important to teach collectors to approach each and every call with a “clean slate”. No matter how many times a collector may hear “no”, they must go into every call expecting a “yes”. “Shrugging off” any irritation, disappointment, or frustration from a previous call or calls may seem simple but it can mean the difference between failure and success. If a collector goes into a call expecting a negative outcome, they have lost before they have even dialed the number.
Knowing how important a role attitude plays in collection calls is only the first step. Every collector has to find techniques that work for them. The next step is incorporating those techniques into a collector’s workflow. Have collectors focus on “wiping the slate clean” after every negative call and soon it will become their automatic response to any negativity. This automatic response will ensure collectors begin each call equipped for success with a positive attitude.
This is not just a formula for success in collections. Learning to overcome negativity and move forward with a positive attitude also helps us be successful in life.
Posted in blog | No Comments »
Participation in the Community
Friday, January 21st, 2011
Supporting our local community has always been important to PRC. This year our employees showed an even stronger commitment to helping those less fortunate. It may have been due to the hardships we have faced in our local economy. Or it may be that as part of the debt collections industry our employees are constantly exposed to people from all regions of the country and all walks of life that are struggling financially. Whatever the reason, PRC employees went above and beyond this past holiday season, showing incredible generosity.
For the lat few years PRC has supported our military service members and their families through Operation Homefront, www.operationhomefront.net. This is a wonderful organization, and it has been a rewarding and uplifting experience for our staff to support those who are fighting for our freedoms.
In addition to supporting Operation Homefront in 2010, our employees continued to expand their efforts in supporting our local community by making donations to The Durham Rescue Mission. Our employees are always excited to support organizations that are right here in our own back yard, helping families in our local community. The Durham Rescue Mission, www.durham rescuemission.com, provides food, clothing, shelter, vocational training, continuing education, job placement, permanent supportive housing, and counseling 365 days a year. With the support of individuals, businesses, civic groups, religious organizations, foundations, and grants, they have been helping the needy and homeless since 1974. In our first fundraiser for this organization PRC raised over $1850.00!
Finally, PRC continued its support for SAFEchild. SAFEchild, www.safechildnc.org, is a Wake County nonprofit whose mission is to prevent child abuse in Wake County by helping adults and children create nurturing environments free from abuse and neglect. During the 2010 holiday season instead of sending our Clients the normal Christmas goodies, PRC made donations to SAFEchild on their behalf.
Posted in blog | No Comments »
Debt Collector Complaints on the Rise – What’s the Real Story?
Tuesday, November 23rd, 2010
I’ve noticed in recent months various media outlets featuring news and investigative journalist pieces about an increase in the number of complaints being filed against debt collectors and collection agencies. Just this morning as I completed my usual routine of getting dressed for work, I had the TV on cable news in the background where they had a prominent attorney who is often featured on FNC providing consumers tips on how to recognize illegal debt collection practices. I will add that he also advised that consumers should not avoid debt collectors.
Various reports have indicated that complaints to the FTC regarding debt collectors have risen from about 95,000 in 2007 to 119,000 in 2009. Given the number of communications initiated by debt collectors, I find this number of complaints is not absurd. It seems common sense though to assume that with unemployment up so high in addition to the number of our citizens who are either underemployed; taking jobs for less money or part time; we would have an increased volume of collection conversations with the public in general. I cannot with any statistical certainty tell you that the rise in complaints is proportional to the rise in delinquent debt; that would take some serious investigation. I can say for certain that there are people I know personally that due to our economic realities are finding themselves on the phone with a debt collector. Many of these consumers have never had such an experience previously.
Some of these pieces have contained a degree of balance; pointing out that some agencies and the industry as a whole takes efforts to root out such harassing practices as; cursing consumers out, calling repeatedly and hanging up either at their home or place of business, and in extreme cases calling them awful names. No legitimate and respectable collection agency will encourage or allow such practices within their company or by any of their employees. We certainly do not here at my company. We have every employee on our team sign a commitment to the ACA collector pledge as a part of their employment requirements with us. The pledge reads:
“I believe every person has worth as an individual
I believe every person should be treated with dignity and respect.
I will make it my responsibility to help consumers find ways to pay their debts.
I will be professional and ethical
I will commit to honoring this pledge”
The terrible and harassing events featured on nearly all of the news pieces are rare; not the norm. However, if a news organization decides to run a piece on this subject they of course gravitate toward the sensational part of the story; boring stories do not get attention right?
I have been a volunteer leader with an organization called the Crossroads Career Network for nearly two years now. I have worked closely with individuals who are dealing with unemployment as they navigate the difficult economy we all face. When some of the job seekers (who I affectionately call career explorers) learn that I work for a collection agency; they often come to ask me for advice on how to work with a creditor or a collection agency that is pursuing them for some debt. I quickly thank them for their willingness to open up to me about their situation and try to give them the best advice I can. I briefly explain that the more I know and understand about their bills and their financial situation the greater the chance that I can give them the best advice possible. If I sense there is at least a modicum of trust in the situation, I begin to ask them some questions. I ask them about their conversations with collectors or communications in general with the agency. I ask them about the nature of their debt, of the particular delinquent bill in question and of their finances in general. Often the reality is that some of these good people are making tough decisions about money and they must keep a roof over their heads, feed and take care of their families.
With each conversation of debt collection advice, there are common points I always cover. I encourage them to not avoid the collection agency, to stay in contact with and agency and their creditors. Keeping the dialog open empowers them to help create either or short term or long term game plan (depending on the severity of the financial situation); it also helps the creditor or collection agency to make more informed decisions – to empower them or enable them to be in a better position to work with them and eventually resolve the debt.
In our core, as men and women, as mothers and fathers, as employees and business owners; very few of us opened a credit line, financed a purchase, or funded an entrepreneurial business thinking one day we will have more bills than money and it will be so much fun to stick it to our creditors. That’s not the heart of the human spirit nor is it the core values of the American way.
Yes there are collectors who behave badly, some very badly and even illegally. Our state and federal government offices have resources in place to help consumers who are legitimately being harassed. Another fact is that is less than 5% of consumer in debt call a collection agency back after an attempted contact by letter or telephone. So, consumers in debt need to be willing to swallow some pride when they find themselves in the unenviable position of having more bills than money; and collectors must be trained and prepared to behave and perform in a highly professional and ethical manner when they communicate with consumers. It is a delicate balance of trust that must be maintained by all involved.
Even those of us with high personal credit scores can at times find ourselves contacted by a collection agency. For example; moving from one state to another in 2008 there was a bill that was overlooked by my wife and I. The creditor either did not or could not take the steps to find our new address and sent the bill to a collection agency. The collection agency found my current address and mailed me a collection notice. I quickly called them, gained the specifics on the bill and paid it. That very same year I received services from a company for some maintenance on my home. The service provider never completed the work properly and I would not pay the bill. I tried to negotiate with the business owner and he refused. Six months later, the account was placed with a collection agency. Again I responded quickly to them and provided all the documentation regarding the dispute and advised them in writing that I would not be paying. In either case I never avoided the creditor or the collection agency.
More than ever; when talking to consumers in debt, many collection agencies that are making real efforts to compete and perform with professionalism and high ethics. They are doing so by training their collectors and staff to use a non-combative and consultative approach. This approach is designed to help the consumer explore ways or plans for paying off their debt via other avenues of cash, debt consolidations, short or long term payment plans, etc. Weather your business currently works with a collection agency plans to expand such use or even begin using one for the very first time; it is recommended you ask the agencies management how they are working with consumers in debt.
Those of us in the Accounts Receivable Management profession who do our job well know that we are having a positive impact for or clients, for consumers and for the economy as a whole. Various independent studies have been conducted that provide the positive financial impact debt recovery has on the prices of goods and services to businesses and consumer alike.
The reality is that there are some collectors out there who do their job in unfair, unethical, and even illegal ways – they are the rare exception and not the norm. There are also many consumers in debt who do not communicate with their creditors or the collection agencies they contract with. The debt collection process is a two-way street and a relationship that requires professionalism and ethics from everyone involved – creditors, consumers and yes; collection agencies.
Posted in blog | 7 Comments »
Ask Doctor Debt
Thursday, October 21st, 2010
Many consumers are confused as to why debt collectors behave as they do. Not a surprise. While there are debt collectors who do not follow the laws and regulations or operate too much in the grey area, most consumers are actually confused and frustrated about the laws that were actually enacted to protect the consumer. To say this is frustrating to collection agencies is a massive understatement. We are actually being accused of being a “scam” because of the laws the government felt were necessary to protect the consumer!
One small example of this is the process that agencies must go through to verify that they are speaking to the correct responsible party about the debt in question. The two primary methods to verify identity are the social security number (or just the last 4 digits) and/or the date of birth. You can image how consumers react when they get a call from someone they do not know asking them to verify the last 4 of their social security number. A lot of consumers think it is a scam. The agency cannot discuss the reason for our call, or even who they are and what they do without verification that they are speaking to the right party. So in the end, the agency can’t discuss the debt and the consumer thinks it’s a scam. This is yet another example of the unintended consequences of obtuse government regulation.
A wonderful website produced by the ACA (Association of Credit and Collection Professionals) is ask doctor debt. This website is a great way for consumers to ask questions regard the ever complex web of state and federal laws governing the debt collection industry. I would recommend that you keep this website handy and refer confused consumers to this site to get their questions answered correctly. As we all know there is a lot of misinformation on the web, so it is good to have a site that can be trusted to provide accurate information. The website address is www.askdoctordebt.com.
Posted in blog | 5 Comments »
Net Back is the Most Important Thing
Wednesday, September 22nd, 2010
There are many factors to consider when selecting a collection agency or attempting to evaluate current agencies. I would make the point that the most important factor is NET BACK DOLLARS. Obviously, this is assuming that the agency is acting in an ethical manner, treating your customers well and follows all state and federal laws; those factors are a must.
Too many times you see Requests for Proposals or Invitations to Bid and the agency selection criteria is heavily weighted to cost. While this is understandable reasoning, it often results in less money to the bottom line of your organization. Net Back Dollars is THE most important financial criteria to look at in evaluating agencies. Net Back Dollars is defined as the amount of money that is returned to the Client/Creditor after the agency takes its fee.
Agencies are good at quoting low rates to get business and then cutting corners to make a profit. One thing we must remember is that there are no nonprofit collection agencies that I am aware of, unless they are owned by a health system. So when an Agency is awarded this business at too low of a rate, they must figure out a way to make a profit. It could include completely ignoring certain segments of accounts, high collector to account ratios, high collector to management ratios, raising the dollar amount threshold for skip tracing or calling the account, placing trainees on your accounts. NONE of these actions will benefit their customers. These are just a few examples of what can happen, and agencies will not tell you when they are doing these things. It isn’t that they aren’t being honest; they are just giving you what you have asked for, which is sub standard recovery.
Consider the Net Back Chart below to give some perspective on what this can mean to your bottom line:
So an Agency charging 20% and getting 10% recovery is the baseline in this example. You may feel that if you can get an agency at 15% and come close to the 10% recovery would be a good deal, right? Wrong, you have just cost your company’s bottom line 93K for the year. Even slightly less rate and recovery is costing money to your bottom line. Being fair and paying your Agencies enough rate to warrant full effort when working your accounts will maximize recovery and your bottom line
So next time you are evaluating your current Agencies or looking for new ones, consider NET BACK as the most important criteria, other than compliance. Evaluate Agencies with this in mind and judge your current agencies on NET BACK, rather than overall percentage of recovery. If you are ignoring NET BACK it could cost you more than just money to your bottom line.
Posted in blog | 1 Comment »