In-house debt collection department vs third-party collection agency
In a perfect world, all of your customers would pay their bills on time and never come close to going into collections. However, life isn’t that perfect and a few of your customers may get into some sticky situations, such as not paying their mortgage or paying their taxes. Luckily, the right collection strategies can help ensure that your customers don’t get to the point where they need to go into collections.
An in-house debt collection department can make a big difference in terms of getting your accounts paid, but they can be expensive to maintain. Additionally, an in-house team will require training and on-going supervision. If you don’t have the financial resources to invest in an in-house team, you can hire a third party collection agency. These companies have already invested in the technology and expertise necessary to collect your debts.
A third party collection agency can give your business a boost, whether you are looking to recover past due invoices or develop a more loyal customer base. Third party agencies also make the process of resolving disputes easier. They will work with you to settle disputes without the need for an attorney. Also, a third-party debt collection agency is likely to have the most advanced technology on the market.
Whether you choose to implement an in-house collection department or a third-party collection agency, you’ll want to do your homework before hiring. The best agencies will be equipped with all the most relevant information, from the latest consumer laws to the most effective collection techniques. There are dozens of third-party debt collection companies to choose from, so choosing the right one for your needs may be difficult.
The best way to decide if you should invest in a third-party collections agency is to compare their services with your own in-house efforts. As a rule of thumb, you should be able to recover more past-due accounts with a third-party collection agency than you can with an in-house team. This will save you time and money and allow your company to focus on what it does best. Plus, a third-party collections agency can help you get your business in front of the most qualified customers, as well as those that are the most difficult to entice into paying.
While there are a number of reasons to consider hiring a third-party debt collection agency, the biggest is that it can help you improve your cash flow. By outsourcing your debt collection to a third-party collection agency, you will be freed up to focus on core operations, such as payroll or sales. Once you have a better idea of how much your company can recover with a third-party collection agency, it’s time to take action. Not only will you be able to reclaim more past-due invoices, but your in-house team will no longer be burdened with a large number of delinquent customers, which can impact your business’s bottom line.
Choosing the best solution for your business depends on the size of your company, your needs, and your budget. For most businesses, the best method of ensuring that your customers keep their accounts in good standing is by implementing a third-party debt collection agency.
Regulations of third-party collection agencies
Regulations of third-party collection agencies are designed to protect consumers from deceptive, abusive and unfair debt collector practices. These regulations are designed to regulate the communication between creditor and consumer, including the frequency of telephone calls and email communications. Debt collectors may contact a consumer only when he or she has consented to the communication. The communication must provide the consumer with the purpose of the call and the name of the creditor. If the collector fails to meet these requirements, he or she may be subject to a fine, lawsuit, license suspension or both.
New York state has its own set of regulations on debt collectors. While these rules are mainly aimed at collecting agencies, they also apply to original creditors. There is an exemption for in-house collectors, which means they are not covered by the FDCPA. However, they must follow the same requirements, which include providing a written substantiation of the debt in hard copy by mail within 30 days.
Third-party collectors are not allowed to use oral communication. The only exception is if the debt collector is a co-worker of the creditor. Even then, the collector must give the consumer a clear “Opt-Out” statement. They must also keep a record of all communications with the consumer for three years. This is in addition to the recordkeeping requirement for the telephone recording.
Moreover, the 7/7/7 rule prohibits debt collectors from making seven consecutive phone calls to the consumer. This rule also applies to messages left on the consumer’s cell phone. It includes unanswered calls and calls that are not returned. Exceptions to the rules are misdirected calls, out-of-service calls and calls to outside sources. Similarly, the collection agency cannot contact the consumer at his or her place of employment.
Although some states have their own local regulations, the majority of them are governed by the Federal Trade Commission. Whether the law is state-specific or federal, the FTC enforces it. Additionally, the National Conference of State Legislatures keeps a list of state fair debt collection acts. Generally, the federal government is on the consumer’s side. But this is not always the case. In fact, some states have local regulations that don’t apply to debt buyers and creditor employees.
Another proposed amendment would require debt collectors to obtain consent before sending an email or text message to a consumer. They would also be required to notify the consumer that they intend to send an email or text to them, as well as to explain why the communication is being sent. After the consumer’s consent, they could still send an email or text, as long as they only do so after they’ve received a written confirmation from the creditor.
The CFPB’s Regulation F is the most important rulemaking to affect creditor collections since the FDCPA was implemented. CFPB announced the final rules on July 30, and they’re scheduled to take effect November 30, 2021. Aside from the changes to the telephone call rule, the regulations also rewrite the rules for content.