Auditing Your Collection Agency 101

Coming from someone who manages operations at a collection agency, this may seem like an odd question, but when is the last time you audited your collection agency?

I’ve worked with clients in the past that had extreme auditing schedules, so much so that we had to have a full time staff member simply to keep up with their requests for data, exports, recorded phone calls, sample letters and so on, but that’s not what I’m talking about here.  That may be the subject of an article titled “How to Over-Audit Your Collection Agency”.  What I am speaking about is that most clients never audit their collection agency – ever.

Here is a list of 10 things you should do to audit your collection agency.  Consider this once a year, or at least when you bring a new agency on board.

1.       Licensing: Is your collection agency legitimate?  Ask for a copy of their license and bond, which are absolute minimum requirements for operating a collection agency in Canada.  If you are working with an agency that is operating without a license, they may be in violation of provincial collection laws, and you should withdraw your business immediately.  Please note that law firms are not required to be licensed in certain provinces.

2.       Accreditation: Is your agency a member of the Better Business  Bureau, the Ontario Society of Collection Agencies, the Receivables Management Association of Canada, or some other umbrella organization concerned with public image?  If not, you may have a desire to be concerned.  If an agency isn’t putting in some effort to bolster their public image, they may not be concerned with how they are portrayed by the public, and in conjunction, how your company as their client is portrayed.

3.       Memberships with Key Vendors: Is your collection agency a legitimate member of the credit bureau, to be able to report delinquent debts?  This would be having membership with Trans Union Services, Equifax, or both.  Likewise, do they have memberships with vendors that offer services specifically to the collection industry, such as Cornerstone, Score, Cleanlist, InfoCanada, or the Dunwoody Group, to offer some examples.  Membership with one or more of these groups indicates a breadth of service and a certain level of expertise to employ the services these companies offer.

4.       Collection Software: What software does the agency use to work with your data?  Is it secure to outside intrusion, unauthorized use, or removal of sensitive data from the premises by unsupervised staff members?  Keep in mind very few companies have a completely airtight system, but the question to ask is to find out if there is sufficient due diligence.  If your collection agency uses cloud storage, unlocked wireless networking, has a shared premises with another business, or other careless infrastructures, your confidential data you are providing them may not be as confidential as you like.

5.       What Letters Are Being Used: Ask to see a copy of the collection agency’s letters they will be using on your behalf.  Is the layout and presentation professional?  Is your company comfortable with the consequences for non-payment that the agency is using?  Keep in mind that many provinces require the letters to be either pre-approved or kept on file, so requesting minor changes to letters may not be in your best interest.

6.       Quality of Work: Ask for a handful of screen captures from the collection software on some of your files.  Don’t ask for just the notelines, but a whole screen capture.  This gives you a first-hand impression of the work interface the collection agents work with, and the style of notations they use.

7.       What is their Reputation: Check out your agency’s public image – google their name, and see what complaints consumers have against the agency.  Google the agency name in conjunction with your company name to see if there are issues with how you are being represented.  Do a better business bureau search to see if there are complaints against the agency at http://www.bbb.org/canada/.

8.       Has there Been Litigation:  Do a quick search of your agency at CanLII (http://www.canlii.org/en/) to see if your agency has a history of being the subject of litigation, either civil, labour-related, or criminal matters.  If they have, this should be a huge warning sign.

9.       Ask for Your Data: At any point, you can ask for a data export from the agency.  It’s worth asking for to see if the agency is reluctant to share their work with you.  This data can include last time a  file was called, status of the file, balances, and accumulated notelines.

10.   Meet Your Agency In Person: It’s worth asking to do an on-site visit of the agency, to meet the managers and collectors.  Understand that the agency’s collection floor will be contacting debtors from multiple clients, and they will not be comfortable with you having access to private data for their other clients, but it’s worthwhile to have a brief meeting with the collectors to understand their personality and approach to your accounts.

These simple steps can be valuable when looking at your current agency, or examining another agency that is soliciting you for your business.  Often, the quality of an agency is overlooked in favour of low commission rates, swift talking sales representatives, or a decision to use a collection agency years ago that has never been re-examined.

If you need help examining your existing agency, our company is an Accounts Receivable Management Firm, and offers a free initial on-site consultation for any client for up to two hours to examine aspects of the credit cycle.  Should you wish to use this time to examine the data you have gathered from your existing agency, we would be pleased to do so.  While our company is in the Kitchener-Waterloo area, arrangements can be made for any client in the GTA area of Ontario, or west of Toronto as far as Windsor.  For clients further afield, we can offer a remote audit.

Blair Wettlaufer

Kingston Data and Credit
226-444-569