Collection agencies have collectively (pun intended) earned a mixed reputation over the years. It's not purely unjust, as the debt collection industry has seen all kinds of operators come and go, some exceptionally good and a few who have given life to a world of mythology through questionable practices, inflated claims and disappointing performance.Over the past two decades, I've listened carefully to clients and answered hundreds of good questions, and that's fantastic! Customer education is a big part of our work, which is why businesses need a collection agency in the first place; you have your own area of expertise to focus on. Ours is debt collection, and through it we're happy to help businesses enjoy ongoing success.
Of all the questions I've received, a number of them continue to return in various incarnations. Here are 10 common collection agency myths that year after year continue to rear their beastly heads:
Myth 1: Collection agencies only care about collecting and can hurt your business.
Perhaps the best response to this myth can be found in the words of a big, long time customer of ours who has used various channels of debt collection. “You're the only one that looks after me,” he said. A truly great collection agency understands its place within your business's world, and always works to collect in your best interests, respecting the debtor and doing whatever possible to preserve your business relationships while collecting quickly.
Myth 2: Collection agencies are risky and expensive.
Nothing could be farther from the truth, especially compared to alternatives like litigation. The very best collection agencies assume all the risk and do not get paid until they are successful in collecting on your behalf. That means those collection agencies are highly motivated to create results quickly. The fees you pay will only be a percentage of the debt, the majority going to you. Compare this with not being paid at all, and there is really no substantial risk in using a good collection agency.
Myth 3: Collection agencies are not reputable businesses.
Almost every industry has its bad apples, and you should do your homework before you consider handing over your accounts receivable to any collection agency. How long has the agency been around? As the CEO of MetCredit, our strong 42-year reputation and the ethics behind it are of the highest importance to me. Our collectors contact thousands of debtors across Canada every month, so you can imagine there is ample potential for friction. That's why I personally put myself out there, making my contact information public and ensuring we address all client and debtor concerns that are brought to our attention. It's also why we have an A+ rating with the Better Business Bureau. Our debt collection code of ethics is very literally written on our walls and spoken in our halls.
Myth 4: All collection agencies are the same.
There are all kinds of collection agencies out there, making every sort of claims, but no two are created equally. For example, if you are looking for a national collection agency, be sure to check where the prospective agency has physical offices—some that make this claim have only one location! This is particularly important in Quebec, where only companies with a physical office in Quebec can legally collect consumer debt within its borders. As with any new supplier, ask tough questions and test claims for validity. Every collection agency is different, and the very best are in their own league entirely.
Myth 5: Collection agencies operate in a wild-west environment.
A few may seem to, but it shouldn't be that way. At my company we take pride that we work in an industry with very credible roots and high standards, and are longtime active members of the Credit Institute of Canada, where our management team members routinely serve on the local and national Board of Directors to help ensure consistent training and protocols throughout the credit industry. Other relevant affiliations of ours include ACA International (The Association of Credit and Collection Professionals), Credit Association of Greater Toronto, L’Association des Directeurs de Credit de Montreal Inc, Ontario Society of Collection Agencies, Receivables Management Association of Canada and Western Forum of Credit & Financial Executives Association. Active membership in organizations like these cannot in itself guarantee that a given collection agency will uphold professional standards, but it's a measure of how invested they are in the betterment of their company and industry.
Myth 6: Collection agencies are bad for business.
This is another example where the direct opposite of the myth is true. In fact by collecting debt, a collection agency keeps its client's business solvent and can even trigger further successful collections down the line by helping the original debtor to get paid by his or her own creditors. Keeping businesses healthy and cash flowing promotes a vibrant economy, and the work Canada's best collection agencies do is never more important than during tough economic times.
Myth 7: Collection agencies all operate out of overseas call centres.
Many in fact do, because it can be a lot more profitable to sprinkle cut-rate wages into a faraway economy. But as long as I'm at MetCredit, we will operate from within Canada, employing Canadians who contribute to our economy and can relate to the businesses and individuals they contact on a socio-economic and cultural level. Our employees are fluent in at least 20 languages and represent an amazing cross-section of Canadian diversity. We also find that our call quality is much better and we can connect more reliably with collection calls originating from Canada.
Myth 8: Collection agencies have no more power than an individual.
The truth here is that a collection agency can have significant resources and capabilities that ordinary businesses and their accounting departments do not, including credit reporting. The three credit reporting agencies in Canada, Dun & Bradstreet, Equifax and TransUnion are all plugged in to the top collection agencies, and they update credit reports accordingly. Having a collection agency referenced in one's credit report has a major impact on the overall credit score. Top collection agencies usually also have at their disposal in-depth debt collection knowledge, in-house legal teams and powerful debt collection software.
Myth 9: Using a collection agency should only be a last resort.
This is a very dangerous myth, because the older a debt is, the less likely it is to be collected. (I cover this in detail in my next post.) The most effective accounts receivable managers are quick to turn overdue accounts over for collection as soon as internal processes fail to secure a timely payment. It not only yields better immediate results but sets a strong precedent, meaning quicker payments down the road.
Myth 10: Good businesses do not need a collection agency.
Again, the opposite is true. Successful businesses of every shape and size work with collection agencies to get or stay financially healthy. And you don't need to be big. MetCredit clients happen to include major telecoms, retail chain stores and banks, but we also work with mom-and-pop companies, startups, trucking companies, manufacturing businesses, farming operations and probably companies structured much like yours.
Those are the myths we most frequently encounter, and you may have come across others—I'd love to hear (and debunk) them too. I'm always happy to answer questions, resolve problems, and help our clients get (and keep) their Accounts Receivable in the best shape ever.