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Collection Agency vs. Attorney



By Richard D. Whitney, Jr.

There is a time and a place for all professional service providers.  This is certainly true with collection agencies and attorneys.  Unfortunately, bad debt is not like fine wine.  It does not get better with age.  Attorneys are, by design, responsible for navigating a client’s way through a complex and confusing legal system.  Therefore, they are geared toward processing their tasks through extensive legal paperwork.  A client should expect nothing short of exceptional documentation of their legal affairs.  However, this legal documentation process typically encourages an attorney to work at the same speed as the legal system, slowly. 

When it comes to accounts receivable liquidation, time is of the essence.  Ever day that passes decreases the statistical collectability of an account.  This is where a quality collection agency comes into play.  They are designed to produce efficient, timely contact with a debtor in an effort to liquidate the debt.  Typically aggressive contact is made the same day as placement.  A good agency will make direct contact versus simply sending demand letters, which may take a week or more to hit a debtors trash can.  Quality collectors listen to a debtor’s concerns, offer solutions and execute on those quickly.  Keep in mind that collectors are typically paid on commission.  Therefore, the quicker that a file is collected, the sooner they make their money.  It is that monetary incentive that allows agencies to prosper in such a litigious society.

Now this does not mean that there is not a place for attorneys in the collection world.  A full service litigation department is an absolute must at a collection agency.  This is because some debtors simply have to be forced to pay through litigation, either because of dispute or sheer stubbornness.  Collection agencies offer clients case management and access to specialized attorneys who typically work within the contingent rate structure.  Regardless, the process is very lengthy and time consuming.  A creditor must be prepared to have the process take a year or more in some cases.  Most matters are started with a written demand letter allowing fifteen to thirty day to respond.  Then the lawsuit must be filed, (another five to ten days).  Then the debtor has to be served (another thirty to forty-five days).  At that point the debtor has thirty to forty five days to answer the complaint.  Get the point?  The case does not even have a court date yet!!

Note that less than five percent of all files that go to a collection agency are ever processed through the legal system.  Most are either collected or are deemed uncollectible without the client having to waste time and money wrangling with the courts.  This efficiency makes the collection agency industry an energetic and thriving industry.

When deciding what to do with uncollected receivables, a creditor must consider what will produce the quickest results.  Time is money.  Therefore the collection agency is always the best bet.

...Finally, An Agency After Your Money!!
© 2015 Whitney & Richardson, Inc.