Collection Agency Contracts (and Other Forms of Oppression)

 
Often, I hear from prospective clients, “I’d love to work with your company, but we’re locked in a contract with our current vendor for the next two years”.
 

Really? 

I can understand wanting a service agreement to clearly lay out the expectations of each other, but all too often I hear about agencies who ‘lock’ a client into using their service. That strikes me as the definition of insecurity. 

If you provide a valid service, and treat your client (as clients, I would hope), then any collection vendor should feel comfortable and secure knowing that their clients won’t want to go anywhere else, because there is a good fit between the two companies.
 

Now, when a creditor initiates a contract, often they will initiate a term of service through a bid process, and that’s okay – almost always, their agreements almost always have an ‘escape clause’ that will let them end the contract if they are unsatisfied with the vendor’s work. But what we are talking about here are terms set forth by a vendor in their agreement.
 

I’ve seen a lot of client and vendor agreements during my time in the credit and collections industry. However, all too often I’ve seen there are a number of things that could be covered in a collection contract that aren’t. While each agreement needs to be tailored to the vendor and the client’s structure, Here is a quick list of items that collection vendors might want to consider when they initiate an agreement:



1) Agreements from both parties that everyone will act within the laws that govern them (the Collection Agencies Act, PIPEDA, etc).

2) The information required from the client for the vendor to act properly on their behalf (accurate balances, identifiers for customers, documentation on request, dates of delinquency, etc).

3) Outline the code of ethics or conduct the vendor will adhere to in representing their client – this should be as specific as possible, to show the creditor their brand reputation is protected.

4) Expected methods for listing or revoking accounts with the vendor.

5) The contingency or flat rate to be charged when services are rendered.

6) The circumstances in which fees or rates will not be charged.

7) Methods for closing accounts with the vendor due to disputes, clerical errors, or compassionate grounds.

8) Reporting that the vendor will be provide the client to display their work in progress. This can be as simple as an inventory report or as complex as daily noteline uploads, or call recordings on request being provided.

9) Methods of communication, remittances, and dealing with escalated issues.

10) Penalties or adjustments to fees or volumes of account assignments when services by the collection vendor do not meet a minimum expectation.

11) The process for cancelling the contract and service agreement if either party is unsatisfied with the other.
I don’t believe a contract originated by the agency needs to be a 60-page monstrosity. Some vendors require this, and that’s fine, but if a collection vendor is initiating a contract, it should be clear, understandable, and open-ended.  

 

If a client is unsatisfied with an agency’s work, locking them into a contract not only garners negative brand reputation for yourself, and our industry. These clients won’t be happy or excited to keep on doing business with those agencies when the contract comes up for renewal, so in the long run, it doesn’t protect the vendor.

 

If anyone would like to compare notes on service agreements, I’d be happy to share some examples offline and discuss it in detail. Over the years, I’ve seen some stellar client-initiated contracts, competitive arrangements, and agency vendor service agreements. As always, I can be reached at Kingston Data and Credit at 226-946-1730.

 

Regards,
 

Blair DeMarco-Wettlaufer

Kingston Data and Credit

Cambridge, Ontario

226-946-1730

bwettlaufer@kingstondc.com