Both attorneys and collection agencies can be utilized to collect on legitimate judgments. A collection agency might be the better bet if your attorney does not have extensive experience in debt collection. Collection agencies are specialists in this area where attorneys are practitioners of law.
That being said, not all collection agencies excel in the judgment arena. That’s because judgments are unique in many respects. Sometimes you need the kind of experience a general collection agency cannot offer. So how do you find the right collection agency? By doing your research.
As you research, be sure to ask these four questions:
1. Is judgment collection your specialty?
In the world of debt collection, there are both general and specialized agencies. A general debt collection agency works on things like utility company debts, unpaid auto repair bills, etc. Specialized firms can concentrate on many different things. Some specialize in medical debts; others specialize in mortgages and auto loans.
Judgment Collectors, based in Salt Lake City, Utah, specializes only in judgments. They work on behalf of clients in six states. Because judgments are all they work on, their focus is quite narrow and effective.
2. Do you practice skip tracing?
It is not uncommon for creditors to avoid paying by skipping town. This is especially true in the case of judgments with a potentially high monetary value. So with that in mind, you need to know if your preferred collection agency practices what is known as skip tracing. Skip tracing utilizes a specialized set of databases that allow debt collectors to track down debtors who move around and leave no forwarding information. It is an effective tool that can glean particularly good results.
3. Are you licensed and insured?
This next question is really a matter of protecting yourself. Whatever debt collection agency your company hires should be both licensed and insured. Where licensing is concerned, it is important that the agency be licensed in the same state the judgment was entered in.
Note that licensing requirements vary by state. Debt collection agencies should be able to furnish their license numbers upon request. With that number in hand, you can always contact your state to verify its legitimacy. As far as insurance is concerned, it goes without saying that an uninsured debt collection agency is a big risk. In most states, operating an agency without insurance is illegal anyway.
4. What is your fee schedule?
The last question has to do with fees and payments. You may not know this, but there is no standard fee schedule for this type of thing. Collection agencies can charge a variety of fees based on one of two payment models. The first payment model is the purchase model.
Under this scenario, the debt collection agency purchases the judgment directly from the client. Judgments are considered transferable assets similar to stocks and bonds. Once a collection agency purchases a judgment, it has the legal right to collect on that judgment.
The downside of the purchase model is that collection agencies will always offer less than the value of the judgment itself. They have to in order to make a profit. Those who don’t wish to use this model can use the contingency model. Under a contingency scenario, the collection agency only gets paid if it succeeds. Fees are generally based on a certain percentage of the total amount collected.
If your company is considering hiring a collection agency to collect on outstanding judgments, be sure to do your research first. Ask the four questions listed in this post, along with any others you might have.