When a collection agency calls, and advises a consumer or business that they will be undertaking legal action or affecting the credit bureau file for an outstanding debt, it is essential to follow through on these consequences. Whether it is the agent personally, or another person at the company, it is important to have a mechanism for consequences.
The agency should have a method or tool for the collectors to control when an item is reported to the bureau, be it a checkbox, status, or command button on their collection software, or even a hyperlink and login directly to the credit bureau for unusual circumstances.
As well, if a debt meets minimum criteria of balance and execution, court action should be started. For our office, the guideline is a $3000 minimum balance, a delinquency date within the statute of limitations, and a source of wages that can have a garnishment applied.
Why all collection agencies are not members of the credit bureau, or employ a paralegal or lawyer to execute claims is beyond me – not only could they be in violation of the Collection Agencies Act for threatening action or consequences they do not have the power to perform, it is a source of revenue for the agency, and affects the outlook and effectiveness of their own collection agents.
Every agency should make the technical investment in their collection software to be able to export a data file to export to Trans Union Services and Equifax Canada – it is not expensive, and once set up, is not time-consuming. And the return on this tool is far reaching, with items remaining on the credit bureau for six years.
For court actions, collection agents can be trained to screen and assist with initial paperwork for a small claims court action, or liaise with an affiliated lawyer to undertake a general court action. This should not be seen as a failure for the collector to collect on an account, but recover an account that they would otherwise be unable to collect on, without continuing with repeated calls and letters with a diminishing ratio of returns.
If a collection agent knows for a fact that their agency affects the credit rating of debtors, they will speak with knowledge and confidence when speaking to debtors through the course of their day. If a debtor who previously refused to pay calls in a year later because they have been denied credit, the collection agent will know that their office has the power to affect people with a push of a button.
The key here, of course, is to educate the collection agents on the process for reporting to the bureau or legal action – the more knowledgeable they are, the more effective they will be when presenting these consequences to the debtor.
Lastly, follow-through should also include the collection agent reviewing the file after consequences have been brought to bear – the debtor may wish to resolve the default judgment before garnishment, or may want to resolve the claim before you apply compound interest to the already existing credit bureau listing.
If you have any questions regarding credit bureau reporting or civil legal actions, or collection agency infrastructure that includes these processes, please feel free to contact myself.
Kingston Data and Credit