8 Myths About Debt Collection Smashed
Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.
Dealing with debt collectors can be scary for some people due to old myths about debt collectors and how we collect debts. There’s a lot of misinformation about debt collectors: how much we charge, how we collect debts, how to deal with us, and what we can and can’t do when collecting a debt.
If you’ve never used a debt collection service for your business, you may have many preconceived notions or questions about what a debt collection agency does. Debt collection agencies have a negative stigma attached to them, and this is mostly due to the many myths that surround debt collection. Many businesses are afraid to use debt collection agencies to help collect on past due accounts because they’re afraid that it will negatively impact their business.
However, using a debt collection agency can be incredibly beneficial as it allows you to focus on your business while someone else handles the debt collection process.
Here are 8 debt collection myths I would like to clear up:
Debt Collection Myth 1: You gotta be mean and tough to collect debts.
Fact: This is the number one myth that I want to bust wide open. I am proud to call myself a debt collector and I am proud to say I have never yelled at anyone or harassed anyone in order to collect a debt. Ever.
Yes, sometimes, we do have to have some tough conversations, but this is very rare. Yes, we get some debtors who ring us and they are upset, however, that does not mean that we will also get upset. It’s the old saying, “you catch more flies with honey than you do with vinegar”.
Our philosophy is to be kind, courteous and to listen to the debtors. See how we can work together to help them.
Debt Collection Myth 2: Debt collectors continually hassle people who cannot pay.
Fact: One of the first lessons a debt collector learns is that harassment of a consumer is both ineffective and also against the debt collection guidelines. Instead, debt collectors are trained to listen to what consumers say and determine if they actually have the resources to pay the outstanding debt.
Debt Collection Myth 3: A debt collector will come to your door for payment.
Fact: Another myth that really bugs me, so let’s get this straight. For ordinary pre-legal debts, there is no reason why we need to knock on someone’s door for payment of a debt. The media has perpetuated the image of the debt collector knocking at the door for years. From Marx Brothers movies in the 1930s and depression-era cartoons to television and newspaper stories, debt collectors are shown knocking on doors.
In reality,debt collectors rarely go to anyone’s home or business to collect. It simply isn’t efficient and it can be very confrontational. Using telephones and modern technology, today’s debt collector can make hundreds of contacts a day—many more than by going door-to-door.
Debt Collection Myth 4: Debt collectors force people into bankruptcy.
Fact: In reality, it would not make sense for a debt collector to encourage a debtor to file for bankruptcy. When people file for bankruptcy, their financial obligations to their creditors are usually wiped clean—and the credit granter and debt collector receive very little or nothing.
Debt collectors understand that people in financial trouble often need guidance in settling their accounts without expensive litigation, and often need the flexibility of alternative payment arrangements to work out their financial trouble. A debt collector’s business is to collect, but in practice, collecting often includes counseling.
Debt Collection Myth 5: Debt collectors don’t care about your problem.
Fact: Yes, we do. If we don’t collect, we don’t get paid, so it’s in our best interest to work with you to find the best solution. Debt collectors have to determine the true reason why a debtor cannot pay. This will take time to work on the reasons why the debt came about, work out any disputes, then work on a way to get it paid so it’s a win-win for both parties.
Debt collectors can often offer extension on payment, an instalment agreement and sometimes, even both. One thing we cannot do is offer advice, so we always refer people to Financial Counselling Australia if they need advice.
Debt Collection Myth 6: If a debtor doesn’t pay, they’ll go to jail.
Fact: No, you won’t go to jail if they don’t pay back their debt. Any debt collector who threatens a customer with criminal charges or jail time is doing so illegally. There is a process that someone will go through if they don’t pay back their debt, but going to jail is not part of that process. One of the repercussions of non-payment of a debt may be legal action, however, this is very rarely the case, if the debtor is working with the debt collector on a solution.
Debt Collection Myth 7: You’ll lose customers if I used a debt collection agency.
Fact: Actually, by using a reputable debt collection agency, you are sending a strong message that you are serious about your accounts receivable processes and that you are organised and efficient. If anything, this will enhance your business’ reputation. Most customers understand that if they don’t pay their bills on time that it will go through the collections process.
It’s important to choose a debt collection agency that conducts business legally and ethically. A good debt collection agency will act as an extension of the client’s company. They will always keep in mind the integrity of the client’s brand, whilst also being respectful in their treatment of the debtors/customers of these clients.
Debt Collection Myth 8: Debt collectors are expensive.
Fact: Every collection agency has their own payment structure, but collection agencies earn most of their revenue from commissions on the debt they collect from your customers. You’ll only pay an agency if they collect on the debt, and their commission is only a small fraction of the debt collected. In fact if your terms include a penalty clause to charge recovery fees and/or legal fees, we can then also attempt to recover our recovery fee, as well as the debt amount.
The other thing to keep in mind is that, with most debt collectors, you’ll only have to pay that commission if they do collect. You will still end up with the majority of the funds when a particular client finally pays. And when you consider that hiring a debt collection agency could mean the difference between obtaining your funds and not obtaining them at all, it might actually be that you can’t afford not to hire a debt collection agency.
Do you think it’s about time for you to get a debt collection agency?
Debt Recoveries Australia is the expert at recovering your outstanding debts without the drama. For more information, email us at firstname.lastname@example.org or call 1300 799 511. Tell us your problems on Skype at “debtrecoveries”.