Tag Archive for: commercial debt collection

How Debt Collection During Covid-19 Pandemic 2021 Changed

Everything in and around debt since the pandemic has changed, from how much debt Americans are comfortable taking on to how willing lenders are to loan out money and what interest rates are reasonable.

Breaking Down the Numbers

Americans struggled with debt like never before during the Covid-19 pandemic. Here are some key facts pulled from Brookings that illustrate how the pandemic impacted consumer debt:

  • The pandemic increased credit card debt for 30% of Americans. The most attributed reasons for this were inflation and income loss. The demographic that struggled the most with debt management over this period were parents with kids under 18 years old, with 40% adding debt during the pandemic.
  • People struggled to pay bills on time. 28% of cardholders paid credit card bills late during the pandemic. The groups most likely to have missed payments are parents of young children, millennials, < $35,000 earners, and women.
  • Getting access to credit became increasingly difficult. 14% of cardholders say that their card issuer lowered the limit on one of their cards, with 13% claiming that their credit cards were involuntarily closed by the issuer.
  • Credit scores have been volatile. Approximately 22% of Americans haven’t checked their credit score, 27% have seen it increase, and 14% have had a worsened score.
  • Credit, credit, credit! Credit cards are more popular than ever—32% of Americans applied for a new credit card during the pandemic. Many Americans have cited inflation as the reason why they’ve increased their reliance throughout the pandemic, with 46% of cardholders carrying debt from month to month.
  • The average American accumulated $1,700 in additional consumer debt during the pandemic. Some of the most common sources of this include mortgages, credit cards, student loans, and auto loan debt. Interestingly, the bulk can be attributed to the uptick in home buying during the pandemic.

Long-Term Effects of the Pandemic

While the pandemic had dramatic impacts on Americans while it was actively ongoing, the long-term consequences may be even more serious. When Americans were asked about how the pandemic will impact their financial goals,

  • 51% claimed it would make their goals harder to achieve.
  • 41% claimed it would make their goals neither easier nor harder to achieve.
  • 7% claimed it would make their goals easier to achieve.

The pandemic also affected Americans’ spending habits. Research shows that 42% have spent less money than usual since the pandemic began, corresponding with changes in daily activities.

How the Pandemic Affected Debt Collection

Debt collection during the Covid-19 pandemic of 2021 greatly changed, especially the temporary restrictions that states placed on creditor’s actions, including:

  • Filing Lawsuits
  • Garnishing Wage
  • Seizing Property
  • Freezing Bank Accounts
  • Repossessing Vehicles

Furthermore, the pandemic putting different types of businesses in debt led to many owners taking longer than usual to act on collections, creating a massive amount of uncollectible accounts and bad debt expenses. According to CNBC, consumer debt totaled $15.6 trillion in 2021, an unprecedented year-to-year increase.

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How Business Has Changed

Debt Collection Industry Statistics

Now that we understand more about how consumers were impacted by the pandemic and the challenges that the collections industry faced during this time, let’s jump into some statistics sourced from IBISWorld about the commercial debt collection industry and where it stands.

  • The collections industry has demonstrated tremendous growth over the past few years. It was valued at $11.5 billion in 2018 and is currently at $20.2 billion in 2023.
  • The collections industry has outgrown the pace of the economy.
  • The collections industry collects over 30 million debts annually.

How to Successfully Manage Debt Collection After the Pandemic

The pandemic has fundamentally changed how debt collections should be conducted. Businesses have to walk a fine line between making sure they collect on their AR without being overly aggressive or alienating clients still recovering from the pandemic. Here are some tips for conducting B2B collections today.

Capture Additional Data

Proper data collection and analysis can help a business owner identify vulnerable accounts and prevent the collection process from ever occurring. Create a system where you begin gathering and organizing customer data to see what types of accounts are most likely to become uncollectible and what strategies can effectively deter them.

Develop a Segmentation Model

Once you have your information, develop a segmentation model to organize it into relevant categories and aid the analyzation process.

Consider Your Engagement Strategy

Communication can make or break the collections process, so you need to make sure that you’re doing it right. One mistake that many businesses make is that they assume being as aggressive as possible will make it easier. All this does is jeopardize your relationship and damage your company’s reputation. Keep everything cordial, to the point, and objective-driven. Don’t forget to send these communications across multiple channels, so you can be sure that your clients are receiving them.

Work With a Professional

If you continue to struggle after following these steps, then it may be time to work with a professional. For the best partner in commercial debt collection, turn to Rapid Collections! We have decades of combined experience in the industry, and can help get your business’s AR to where it needs to be. Contact us today to get started!

What to Do Before You Send Someone to Collections

You need to do your due diligence before sending outstanding accounts to collection agencies. Sending accounts too early paints your organization as aggressive and could upset debtors who may not have even realized that they had outstanding debts.

Not sure what to do before you send accounts to a commercial debt collection agency? We’ve got you covered. In this guide, we’ll talk about what you should do before you partner with a collections agency and the rules for sending someone to collections.

What to Do Before Sending to Collections

Follow these steps before you send out an account to collections.

Verify Bad Debt

The last thing you want to do is start the collections process for non-existent debt. You can avoid this by thoroughly reviewing your accounts receivable records to confirm whether there is outstanding debt to begin with. Double check your records to confirm that payment was actually received and that you didn’t forget to record the transaction. Accusing someone of payment negligence is serious; it reflects poorly on your business and will damage your relationship.

Resend Invoices

After verifying that an account is negligent, resend your invoices. Communications get lost in transit all the time, which is why you should give your client the benefit of the doubt. Approaching your clients in good faith is essential when it comes to any financial matters. The last thing you want to do is make someone feel like a nuisance, especially if they lack the resources to pay you.

Resending invoices is also going to be crucial to supporting you legally, if necessary. Sending out invoices multiple times will show that your organization tried to reach out to the client numerous times before taking more serious action. It will also prove that you were highly concerned with recovering the debt, which strengthens your legal arguments.

Open Communication With the Debtor

Many fail to realize that debt collection is all about two-way communication. Whether you need to call, text, email, or use another channel, start a conversation with your debtor. Never start off by threatening legal action or saying that you’re going to file a lawsuit. This builds an immediate wall between you and the debtor, making successful debt recovery very unlikely.

Start communications off amiably, reminding the debtor about outstanding debts without being condescending. It’s a difficult conversation to have, but one that is absolutely necessary. Keep in mind that healthy AR is vital to the growth and success of a business. Letting debts slide sets a dangerous precedent for your business’s future.

Stay flexible about payment options, too. While you’d obviously like to get paid sooner rather than later, getting paid late is better than never, especially after using the time and resources involved in a lengthy court battle. If the debtor needs allowances in terms of interest or an extended deadline, we’d recommend working with them on it, if possible.

Document all of these interactions. You want to make sure you’re able to present them in court if necessary down the line. Always assume that court is a possibility because keeping legal processes in mind will help you frame your debt collection process and make sure it follows all laws and supports your case.

Work With a Lawyer

If you can’t reach an agreement after opening up communication with the debtor (or can’t get in touch with them), it’s time to partner with professionals. Professionals can help you draft a final demand letter that threatens legal recourse. While you can draft a demand letter independently, a poorly written one can do more harm than good.

Make sure your demand letter follows all debt collection laws and holds up in court by working with a professional to write it. A professional will know exactly what they need to do to create a persuasive demand letter that manages tone and can hold up in court if it ends up being necessary down the line.

Want to Learn How to Write the Perfect Demand Letter?

Here’s our guide to demand letters. In it, we cover what a demand letter looks like, what should be included in it, and how you can write the perfect demand letter!


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When Should You Send Someone to Collections?

Unfortunately, commercial debt collectors are unavoidable in some situations, even when you follow all of the steps above. This forces many companies to turn to commercial collections agencies to solve their debts.

Finding the right time to send overdue accounts to collections is tough. Sending them out too early could make your company seem like money-hungry vultures that hardly give clients a chance to settle debts amicably. On the other hand, sending to collections too late erodes the line of communication with the client, making debt recovery difficult. Generally, we’d recommend sending an account to a collections agency after 90 days of negligence, assuming that you’ve done your due diligence in sending regular reminders.

Make Your AR Troubles a Thing of the Past

Tired of struggling with negligent accounts forcing you to record bad debt expenses? Turn to Rapid Collections! Our global team has been helping businesses solve AR challenges since 2003, and we could do the same for you. We’re successful in resolving 95% of businesses collection cases, and you don’t pay until you get paid. In all things, we’re a full-service partner, and can take your business to the next level. Contact us today to make AR troubles a thing of the past.

Debt Collecting Agency Myths Busted

There are a lot of rumors that circulate around debt collection. Between unethical collection processes and media representing debt collectors as shady types that enjoy busting kneecaps, we’re not surprised that people have the wrong impression of debt collectors. We get so many questions about what commercial debt collection looks like that we decided to put together a list of the most common debt collecting agency myths—and bust them.

Myth 1: Debt Collectors Harass Debtors

Everyone’s familiar with the concept of the tough, threatening debt collector willing to resort to unethical or even illegal tactics to collect. While there are debt collectors who use underhanded tactics like 24/7 calling and contacting debtors’ coworkers and family, these strategies are ineffective and illegal. Some collectors will continue contacting a debtor after they send a cease and desist letter, which puts their clients and company at legal risk. The right debt collecting agency will never legally jeopardize your company.

Effective debt collectors have no need for shady intimidation tactics because debt collection is a collaborative effort. No amount of intimidation can help collect on debt owed if the debtor simply doesn’t have the money available. Excellent communication skills are key to helping collectors understand debtors and how they can motivate them. The right collectors will work with debtors through open lines of communication.

Myth 2: Debt Collectors Show Up At Doors

Many Americans see the same picture in their heads when they hear the term “debt collector.” They imagine a shadowy figure knocking on a family’s home, interrupting dinner time with threats of legal action, eviction, or worse.

While debt collectors did once knock on doors in the 1920’s, that practice is rare today. Not only is it impractical from a time-management perspective, but there are hundreds of different ways to make contact in 2022. While knocking on doors is technically still an option, cell phones, emails, and social media give collectors a lot of other ways to make contact.

The only time you can expect a debt collector to go knocking on doors is if they have a serious flair for the dramatic, in which case they probably aren’t effective collection agents.

Myth 3: Debt Collectors Force People Into Bankruptcy

Many believe that debt collectors enjoy pushing debtors to bankruptcy. The reality of the situation is that most debt collecting agencies are going to strongly advise their agents against driving debtors to bankruptcy. A debtor filing for bankruptcy is a worst-case scenario for a debt collection agency because it terminates any financial obligations they had to their creditors. This leads to the credit grantor and debt collector receiving very little to nothing at all in repayment.

The right debt collector will understand that people are in precarious financial situations if they’re failing to make payments and will avoid driving them to bankruptcy. This is why effective debt collecting agencies often train their employees on how to counsel debtors and work with them on flexible payment arrangements.

Myth 4: Debt Collectors Take From the Downtrodden During Economic Hardship

People assume that debt collectors love economic downturns because it translates to more unpaid debt. While there is more uncollectible consumer debt during economic downturns, those accounts are usually much harder to collect. As mentioned earlier, collecting from debtors who file for bankruptcy is impossible. Finally, a prolonged recession leads to less AR as a whole, which obviously means less to collect.

Debt collectors do not prey on the downtrodden either. Debtors come from every walk of life—a lot of people find them in circumstances where they’re suddenly unable to make payments. The types of people collectors most often deal with are those who’ve had lifestyle changes due to unforeseen circumstances, didn’t know what they were getting into with credit, or people who are trying to avoid payment.

Whatever the case may be, the right debt collector will work with these people to make sure that they’re able to make their payments on time.

past due bills pile

Bust Myths and Expectations With Rapid Collections

Rapid Collections is here to help! We’ve been offering reputation conscious collection services since we were founded in 2003. If you need effective collection services that don’t compromise on ethics, turn to Rapid Collections as your next debt collection partner and build up your cash flow and also gain extensive knowledge on prevention and collection best practices.

Guide To Business Debt Collection Laws

It’s critical to manage cash flow and revenue for a business. Making sure your company has enough equity to pay bills and cover salaries is what maintains daily operations. However, a client’s unpaid invoices can sometimes begin piling up and impacting your bottom line. Retaining the services of a commercial collection agency is one of the strategies that business owners use to collect debt. This process is efficient as long as you follow the right legal procedures. To help, here’s a guide to business debt collection laws.

Why Are Business Debt Collection Laws Necessary?

Business debt collection laws give businesses and debt collection agencies guidelines that dictate safe practices. They also protect debtors against unfair processes that impact their reputation and long-term financial capabilities.

Commercial Debt Collection Laws

While commercial debtors don’t have the same level of protection that consumer debtors enjoy, there are some business debt collection laws that must be followed, including:

Fair Debt Collection Practices Act (FDCPA)

The FDCPA is the primary federal law that oversees debt collection processes. It prohibits commercial debt collectors from using abusive or unfair practices. Some of the restrictions placed on debt collection agencies include:

Time and Place

Debt collection service providers can’t contact you at a time or place that’s inconvenient to the debtor. Contact before 8 a.m. or after 9 p.m. is prohibited, and the collection agency can’t reach out to you at work.

Harassment

Debt collectors are forbidden from harassing the debtor or anyone associated with them. Any contact, whether over the phone or in person, must maintain a professional tone.

Attorney

If the debtor retains an attorney, all contact from the collection agency must go through them. However, this is only true if the agency knows the attorney and is provided with their contact information.

person using calculator

Commercial Collection Agency Association (CCAA)

State and federal governments don’t govern business debt collection agencies. Instead, they established the CCAA, a non-government body that exists under the Commercial Law League of America. Founded in 1974, this agency supervises and improves best practices in the commercial debt collection industry. To become a certified member of the CCAA, an agency must:

  • Have been in operation for at least four years
  • Have a separate trust account where funds are deposited
  • Have up to 80% of their entire operations because commercial debt related
  • Retain at least one agent that is a member of the Commercial Law League of America
  • Offer a $300,000 bond to protect the creditors it serves
  • Be open to random visits from the CCAA’s executive directors

The CCAA also has a strict code of ethics that each member must adhere to that includes:

General Conduct

Every member of the CCAA is required to follow their general conduct rules, such as:

  • Maintaining a high standard of fairness and honesty
  • Providing an efficient collection service that protects the interest of creditors
  • Operating under a name that doesn’t suggest the agency is a branch of or associated with any government entity
  • Making sure all employees are familiar with and fully comply with the Code of Ethics
    Avoiding any unauthorized processes or practices of the law

Interactions With Creditors

The CCAA also offers guidelines to follow when working with creditors. These include:

  • Comply with creditors’ instructions and promptly process claims.
  • Identify all charges to the creditor.
  • Identify service and administrative charges and keep them separate from court costs and suit fees.
  • Display an official logo on letterhead for all correspondence sent to creditors.
  • Provide professional and courteous marketing of services and don’t engage in an activity that impacts the industry’s reputation.

Relations With Debtors

Managing relationships with debtors is a key element of the debt collection industry. Here are the guidelines provided by the CCAA in these dealings.

  • Avoid deceptive practices or statements that may lead debtors to believe they’re dealing with someone outside the debt collection industry.
  • Show consideration for the debtor’s problems and treat them with respect.
  • Provide the debtor with any documentation that validates the debt.
  • Never engage in any harassing conduct.
  • If the debtor retains an attorney, the agency must deal directly with their representation unless the attorney doesn’t respond to contact within a reasonable time—then you can contact the debtor.
  • Never threaten to damage a debtor’s credit reputation if they don’t pay or cooperate by alerting other vendors and financial institutions.

Are You Looking for a Commercial Debt Collecting Agency That Follows Business Debt Collection Laws?

The Rapid Collection team knows that adhering to commercial debt collection laws benefits all parties. Contact us today to learn more about our business-to-business approach to commercial collections.


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Rapid Collections: An Expert Commercial Debt Collection Agency

The Rapid Collections team understands complying with business debt collection laws is critical for maintaining our reputation as a leading commercial debt collection agency. Our commitment to monitoring and enhancing our processes enables us to take the necessary steps to improve our organization and services. Along with our leading collection agency services, we also offer other solutions to serve our clients, including:

Legal Representation

Our goal is to settle cases quickly for our clients, but sometimes legal representation is necessary. We’ve carefully selected our legal team to make sure they offer comprehensive knowledge and expertise in multiple industries. Our attorneys provide enhanced attention to detail that ensures your case best suits your company.

Consulting

We understand that the debt collection process is difficult for many clients. That’s why we offer consulting and training services to equip you with the right tools. Our team works with clients to develop a custom approach that best suits their needs.

Contact Rapid Collections today to learn more about how our process respects business debt collection laws.

Signs You Need To Partner With a Commercial Debt Collection Agency

Are you a business owner with multiple outstanding debts? If so, your business could be at risk. Luckily, there’s a solution. Keep reading to learn why you should partner with a commercial debt collection agency and find out how ignoring outstanding debt negatively affects your business.

Common Signs You Should Hire a Collection Agency

Delinquent accounts can tarnish your reputation and your business’s success. But not every business owner knows when it’s time to reach out to a debt collector. If you’ve never had to deal with delinquent accounts or accounts receivable issues before, you might be unaware of some important red flags. These are the common signs that you should hire a commercial debt collection agency:

Bill Collections Take Up More of Your Time

If you’re a business owner who spends more time collecting bills than focusing on daily operations, it’s time to hire a collection agency. In order for your business to succeed, you need to:

  • Be present
  • Focus on daily tasks and future success
  • Build relationships with employees and customers
  • Maintain a consistent cash flow

You can’t do any of these things if bill collection keeps getting in the way of your day-to-day routine. Commercial debt collection agencies help you streamline your collection process, so you can continue focusing on your responsibilities as a business owner.

Your Administrators Are Overwhelmed With AR

Many business owners rely on administrative staff to collect outstanding balances and manage delinquent accounts—but that’s not what they’re there for. If your administrators:

  • Vocalize their need for AR support
  • Seem more stressed out than usual
  • Can’t sustain your delinquent account management

Then you need a commercial collection agency. Putting the weight of AR responsibilities on your admin staff is not only risky because they’re underqualified, but can also make your team stressed. They should be focusing on daily tasks, not taking on the job of a collection agency.

Debt collector calculating taxes

 

Decrease in Cash Flow

If you have too many clients with past due accounts or worry those accounts will become a write-off, it’s time to hire a collection agency. With multiple outstanding accounts and no knowledge of how to collect debt properly, your company is losing money. A debt collector has the techniques, tools, and tactics to successfully collect your debt or reach a different solution that works for you.

Don’t let your money get away from you. Partner with an industry-leading commercial debt collection agency today.


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You’ve Given Up Collecting Outstanding Debts

If you’ve been overwhelmed with delinquent accounts for too long, you might just give up instead of hiring a debt collector. But doing so can significantly damage your organization. Maybe you haven’t hired a debt collector because you feel there’s no way they can do it if you can’t. 

Debt collectors are trained professionals and have the necessary tools to collect your debt successfully or reach your desired solution, whether that be:

  • Partial collection
  • A settlement
  • Filing a lawsuit

Which Commercial Debt Collection Agency Is Right For Me?

You deserve a commercial debt collection agency that:

  • Maintains positive relationships with your clients
  • Avoids threatening techniques like harassment
  • Represents your organization well
  • Leaves the door open for both parties to work together again in the future

Rapid Collections, located in St. Louis, Missouri, does all of that and more. With over 20 years of industry experience, we specialize in commercial and small business collections, managing accounts from midsize to Fortune 500 companies and maintaining a 95% success rate. Our effective debt collection services include: