As the amount of delinquent debt and the sheer number of debtors refusing to pay have risen, so has the demand for commercial collection agencies. In this weak economy, more and more businesses are trusting their unpaid debt to these agencies because they simply do not have the available resources for successful internal debt pursuit.

Why are these agencies so much more successful in the pursuit of delinquent debt than individual businesses? Why is more money recovered by this process of outsourcing than by keeping the efforts in-house?

The logical answer is that commercial collection agencies are privy to a number of resources that make collection of delinquent debt more realistic. Not only do they have dedicated manpower and the experience and skill in the industry; they also possess many tools of the trade that aid in debt recovery.

Many such dedicated agencies use asset investigation as a tool to help recover delinquent debt. Knowing what a debtor has available that can be seized as collateral, or what the debtor may be able to sell in order to pay a debt on which they have previously defaulted, goes a long way in negotiating with the debtor to recover the sum due.

Another way commercial collection agencies pursue delinquent debt is by sending a representative to meet the debtor, face to face. Because phone calls and letters are somewhat impersonal, most debtors are able to ignore such contact. However, when a collection agent appears at one’s place of business to discuss the possibility of repayment, the issue becomes much more real in the eyes of the debtor.

Many agencies also have private investigators on retainer. In some cases, a debtor simply ‘disappears’, changing phone numbers, addresses, places of business, and essentially reinventing themselves in order to ‘get lost’ in the system. While each individual in a collection agency may not be able to discover the whereabouts of a particular debtor, a private investigator has the time and the tools to do so.

In fact, once the debtor is found, the private investigator often finds information regarding assets, debts, and ability to pay back what is owed, all information that can be turned over to commercial collection agencies in order to further their efforts in debt collection.

Because these agencies possess the resources and the knowledge to more doggedly pursue delinquent debt, commercial collection agencies enjoy greater success rates than in-house debt collection for the majority of businesses. In order to get finances back in order, businesses experiencing difficulties recovering delinquent debt may wish to consider this alternative.

Also, explore more important facts and resources about commercial collection agencies, in addition to debt collection options.

The competition in the debt collection industry has grown with the advancement of a down economy and a rise in delinquent debt. As a resolution to the need to collect on default debt, commercial collection agencies are more and more in demand, leading to great profit margins for this type of firm.

Why are commercial collection agencies more successful at debt collection than internal departments and private resources? There are several reasons, and none of them are a secret.

First, commercial collection agencies have experience in the debt collection industry. Whereas businesses often train employees for other aspects of finance and bookkeeping such as standard accounts payable and accounts receivable, there is little or no focus on strategies to collect delinquent debt.

Commercial collection agencies focus on nothing but the process of collecting delinquent debt. No time is wasted on other pursuits, and all members of a particular agency are put under rigorous training to learn the ins and outs of the industry.

An additional problem commercial collection agencies are not forced to overcome is a shortage of resources. A company may not have the funds or manpower for a full internal debt collection department and must pull people away from other tasks. At a collection agency, this is never an issue, with no other focus to pull employees away from their top priority.

Commercial collection agencies are also not concerned with maintaining a good working relationship with clients. Whereas businesses are tasked with cultivating trust and comfort with a customer, and must work to retain a good standing to keep business, there is no such pressure on the collection firm.

On the other hand, commercial collection agencies will never find themselves tasked with maintaining a happy face when facing the client. Rather, they can pursue the debtor with an aggressive determination that could lead to a severance of ties with an internal business agent.

It seems all the benefits of knowledge, resources, and experience are bestowed upon commercial collection agencies, leading to their ultimate success in the industry. However, with a little research and a few hints captured from the successful pursuits of these agencies, businesses can build a successful internal collection firm.

Next, discover more important information and resources on commercial collection agencies, as well as debt collection solutions.

In the last article of this series I described two different sorts of collection agents: in house collectors and third party collectors. In house collectors work directly for the creditor, while third party collectors work for a collection agency hired by the creditor to collect on delinquent accounts. I mentioned that third party debt collectors are bound by the rules and guidelines of the FDCPA, while in house collectors are not. The FDCPA stands for Fair Debt Collection Practices Acts and it is full of strict guidelines that third party collection agents must follow.

So, as you can imagine, many lawsuits spring up due to complications and confusions regarding collection agents and the regulations they have to follow: are they in house, or third party? Last article I brought up three examples, one being the Department of Education collecting on student loans. Anyone who works directly for the Department of Ed is not bound by the FDCPA, while the seventeen private third party collection agencies that it works with are. I described a law suit about a hospital that sent out pre-collection notices to patients with medical debts. If the hospital was ruled a third party collector, everyone who received that notice would have been absolved of their debt. In this case the hospital was ruled a creditor instead.

Finally, I brought up a personal situation I encountered with an in house collection agent that is sort of amusing and ridiculous but pertinent nonetheless. I am infamous for taking out books from my local library and never giving them back, so last summer it got to the point that they sent a debt collector after me! The debt collector called my third party house phone and left a message for everyone to hear about the intimate details of my “delinquent account,” and ask that either I return the books or pay the library for the cost of them. Fortunately for them, I love my library and was also aware of the fact that the collector was an in house, because she requested that I pay the creditor (the library) directly. I gave the books back, but let it be known that if I did not manage my finances as well as I do now, and had been called by a rude third party debt collector who did the same thing; there would have been hell to pay.

To determine if they are work with third party debt collectors or in house collectors in court cases, the courts will take a lot of ideas into consideration to rule if the FDCPA applies or not. If the creditor hired a collection agency outside of its company, the agency’s participation in the actual debt collection process must be minuscule. Questions the court will ask include: is the collection agency only a mailing service? Do they letters say if the debtor does not pay the debt will be referred for collection? (Third party collection agencies send out different letters, in house collectors send out these “warning” letters.) Is the collection agency only paid for sending letters?

If the collection agency is paid on commission, it is most likely a third party collection company. Again, if the agency receives the payments and then forwards payments to the creditor itself, it is most likely a third party collection agency. If a debtor does not respond to the letter and the collection agency has no further contact with the debtor, or if it does not get a hold of the files on the debtors, it is most likely not a third party collection agency. The lesson to be learned here is that when it comes to personal finance, it is important to know who you are giving your money to. A simple question as to whether you are speaking with a third party debt collector or an in house collector can guide the conversation because you will know their limits, like in the case of me and the library, or all of those people in the hospital that might have gotten away with not paying their medical bills.

Mallory Megan works for Rapid Recovery Solution and writes articles on commercial collection agencies Check here for free reprint licence: The Difference Between In House And Third Party Debt Collectors And Why It Pays To Know Who You’re Paying Part Two.