Choosing the Right Debt Collector for Consumer Collections
Yes believe it or not there is news and life in the world of credit management beyond the National Credit Act.
The question posed in this posting is what do you need in a debt collection agency to attend to your consumer collection needs?
Firstly we need to look at what we mean by consumer collections. Consumer collections is debt collections from individuals or the general public as opposed to a commercial collection which is debt collection from clients who are businesses.
Large Consumer Collections
Firstly I would define a large consumer collection as a creditor who has bad debt hand-overs which are measured in tens of thousands and higher.
If you are looking at a large consumer oriented credit department such as a large retailer, micro-loans/consumer bank collection and the like then you are looking for a debt collector with a large call-centre with a large number of debt collectors, sophisticated software and computer systems and a well define collection system. Without this the debt collector will never be able to handle the volume of work handed-over. The skills level of the staff need not be high due to the repetitive nature of the work and the narrow parameters of the very defined systems they work within. The reporting from such an agency needs to more statistical then a detailed analysis of each matter and the ability to integrate into the typical ERP computer system operated by such large consumer creditors. In a large number of cases the creditor is not looking for any form of legal action and is relying on a sound pre-legal procedure to achieve a successful debt recovery when handed over. Some creditors even over a period “filter” hand-overs through a number of collection agencies to maximise successful collections.
Medium and Small Size Consumer Collections
Here the creditor could be anything from a school to a small retailer to medical practitioner and any other type of business servicing the general public where the number of debtors handed-over is not measured in tens of thousands or more but rather in thousands for the medium size and hundreds and less for the small. Here I would say the creditor should be looking for the same degree of professionalism in systems that the large consumer collections creditor is looking for, that is, you want detailed and understandable monthly reports and a collection agency with a high level of automation. But strangely you will want even more then bigger players. Such a creditor is not looking for the ability to handle extreme volumes but they will want a debt collector that has staff with high and more varied skills in their collectors. They must be able to liaise with you as a client and not only “collect by numbers”, have negotiating skills and the ability to act more independently but still with the parameters of a define collection system. The reporting needs to be more detailed on individual matters – the debtors’ names mean something to you as a medium or small consumer creditor.
In addition you need an agency with the ability to seamlessly transfer matters from pre-legal to legal and still report to you or have the attorneys report to you without any delays and additional costs. You have not got the time to “filter” matter through a number of debt collection agencies to maximise results but rather need your hand-over collection process to have “teeth” at the end of the day without costing you an arm and a leg, or throwing good money after bad in legal fees on unsuccessful legal collections.
Your debt collection firm in fact needs to be a professional service firm in the same way as a firm of attorneys, architects or accountants is. To quote Tom Peters, “The professional service firm is the best model for tomorrow’s organization in any industry.”
So shop around the various debt collection agencies to make sure the you are getting the right debt collection agency to meet your needs and do not be scared to ask for references of other clients they service. The difference in the standards of debt collection agencies in South Africa is vast and the impact on your bad debt recovery success can be just as vast.
In a future posting we will look at what type of debt collection agency is needed in commercial collections.