Performing due diligence is an important aspect in the hiring of a collection agency that will be collecting a creditor firm's bad debts.
There are many collection agencies dedicated to performing their duties while adhering to governing laws and professional ethics.
The following steps are set forth to help management in performing the due diligence.
Determine that the collection agency maintains errors and omissions (E&O) insurance coverage.
The creditor will want to make sure that the agency maintains E&O coverage adequate to protect it in the event that a civil suit is brought against the creditor for unlawful actions of the agency.
Investigate the collection agency for compliance breaches.
Here is a list of some of the more significant laws that collection agencies are required to follow.
The Federal Fair Debt Compliance Act (FDCPA). The FDCPA governs activities of third party collection agencies, to protect consumers from abusive tactics and practices. The Federal Trade Commission (FTC) has oversight over the FDCPA. Inquire with the FTC as to any consumer complaints, and how the complaint was resolved.
The Federal Fair Credit Reporting Act (FCRA). The FCRA governs the activities of companies that report consumer transactions to credit bureaus. The FCRA requires that reporting agencies fairly and adequately report consumer transactions on a timely basis. The Federal Trade Commission has oversight of the Fair Credit Reporting Act. The creditor will want to ensure that if the prospective agency reports transactions, it has no unresolved consumer complaints wi th the FTC.
Health Insurance Portability and Accountability Act (HIPAA). HIPAA was enacted to protect the privacy of health care patients, and is enforced by the Department of Health and Human Services. If the creditor is in the health care industry, it will want to verify that the agency has no consumer complaints outstanding for HIPPA breaches.
Your state's Board of Collection Agencies, the Attorney General and your local Better Business Bureau are also excellent sources for due diligence.
Verify the agency's good standing membership in a trade association.
A reputable agency will be a member of an organization such as the ACA International. Membership in this trade association usually indicates that the agency is a reputable business and adheres to a professional code of ethics.
Verify that the collection agency's licensing and business registration is complete and current.
Most states require that collection agencies by licensed by a governing body, such as a State Board of Collection Agencies.
Typically, the state of licensure will also require that the collection agency post a fiduciary bond, to protect the creditor in the event that the agency fails to remit monies owed.
If collection agencies are required to be licensed in your state, make sure that the agency in question has a current, active license and that the fiduciary bond requirement has been met.
Should the creditor be located in a state that does not require agency licensure, verify with your state's offices of the Attorney General and the Secretary of State that the collection agency has posted any certificates and bonds required.
Request the collection agency's business references.
If the collection agency has been in business for any period of time, it has a list of clients that it should be happy to provide as references.
The creditor should ask for at least three business references, with two of those being in the creditor's specific industry and area of specialization. The Creditor should contact all of the references. Ask questions. How long have they served the reference? Have there been problems?
Finally, request the agency to provide you with a copy of its Dun and Bradstreet credit rating.
评论