Can anyone recommend a good collection agency?
One of our clients owes us ~$9400 in back advertising invoices and refuses to pay us. They are a small company (< 10 people) which recently had a change of leadership. The new CEO did not return my calls for 3 months and the finally told me over the phone he was not going to pay, since it was the old CEO who made the deal with us.
I have an agreement (written by our lawyers) signed by their old CEO which spells out the agreement quite clearly. I've Fed-Ex'd a copy of the agreement and the outstanding invoices to the company and have heard nothing.
I don't have the time to keep pursuing this issue and I would like to pay a collection agency a percentage of any money that they can recover. We are also a small company (< 5 people) and recovering a portion of the $9400 would be significant to us.
Has anyone used a collection agency in the past? Any experiences to share? Can anyone recommend one?
58 comments
[ 3.8 ms ] story [ 79.6 ms ] threadFirst, collection agents are threatening and scary. Their presence will affect both the debtor company and its staff.
Second, by selling your debt to a collection agency, you usually give them the right to sell it to other - perhaps more menacing - organisations.
Third, collection agencies primarily work by first sending scary letters, then visiting the debtor in person, then confiscating things of value. None of these are efficient: the debtor loses far more than they owe, and you don't get all your money back.
I don't know you, but you might be surprised how big an issue this is; back in the '90s, I was a key employee at a regional ISPs, and the deadbeat problem was significant.
The standard answer to this problem seems to be having a lawyer draft a letter (hundreds of dollars) threatening a civil suit, and then actually taking the deadbeat to court. If you think a stern letter will get someone to cough up, this is a fine route to take. If you think it'll require an actual court case, forget it. Business civil suits can take years just to get into a courtroom; if your opponent hires their own lawyer, your odds of winning aren't awesome compared to the investment you'll have to make with your counsel; in the end, if your debtor simply goes out of business, you end up with nothing even if you win.
What I'm getting at is that using a debt collection agency is an exceptionally nasty way to recover money. There are other avenues to explore, one of which was suggested by boredguy8 and another by tjic.
Note also: a good corporate collections agency might know tricks you wouldn't think of to spur repayment. For instance, you can ding people's D&B reports with collections issues (who knew?), which can cause problems for some companies with their other B2B transactions.
Some unrelated case-in-point: I'll pay parking tickets in jurisdictions where they're handled by collections. I won't bother paying parking tickets elsewhere, even when they have hard-and-fast "3 tickets and then we boot you" rules. The collections agency is just a bigger headache than getting a boot off.
"The delinquency letter you send out to deadbeat clients that says you work with XXX debt collection agency to recover fees is likely to get a better response rate than the one that says you'll "pursue all options"."
boredguy8 made an excellent suggestion of an alternative approach.
Boredguy8's suggestion seems odd to me, in that it's unlikely to work too often, and even if it does, the attitude of the other company in the OP is such that I would want nothing to do with them going forward.
Other people have made suggestions for alternatives: tptacek (small claims court), tjic (scary lawyer letter), boredguy8 (a social engineering approach).
Lawyer Letter: TJIC's suggestion is a very good one. However he's already sent them a copy of the legal contract the company signed, so it's possible this could likely be a waste a few hundred bucks of attorney fees. If he tried this, and they continued to ignore him, would a collections agency be a logical next step? If not, what would?
Social Engineering: Frankly it sounds like the new CEO isn't going to say "Oh you're going to fly here, man I better cut a check quick". So you're probably out a plane ticket a day of work.
The last thing a small business needs to do is to have a key person wrapped up for hours/day/weeks trying to recover money from a clearly uncooperative/belligerent person. They need to find the best balance of revenue versus time spent. After the threatening legal letter (which is sort of dick-ish I guess), I think a collections agency is the next logical step.
Of course it's going to hurt the other company and its employees, but think about how it's going to affect the submitter's company and small group of employees if they don't get paid for their work. It's a bad situation all around, but it's not the submitter's fault that these people have a employer who doesn't pay bills and he shouldn't have to suffer because of it.
I would probably talk to a lawyer first. For minimal fees you could have a few nastygrams sent out and the threat of a lawsuit might do the trick. If that doesn't work selling the debt to a collection agency for cents on the dollar might be the most cost effective solution.
[edit] Or you could get creative as boredguy8 suggests. I think it's a fantastic idea. It may or may not work, but it doesn't cost much and there's no PR fallout.
He charges about one third of what he gets Whadduya think?
One of the best bosses I know in a rather small manufacturing company, after not being paid for 9 months, called up the CEO of the indebted company and said, "Hey Steve. I need directions from the airport to your office and then from your office to the nearest golf course, because Monday I'm going to fly out there personally, pick up this check, and then go play some golf. Feel free to join me if you want." Not only did he get his money, but the other company realized they were dealing with someone that was going to pursue every issue, no matter how small, and they started ordering far more product.
I'm not saying the exact same approach will work for you (though it could!) -- I'm saying get creative and get serious, and prove it.
His team was already set up to effectively pursue late payments. Less than 1% of their invoices make it past the 90 day mark.
http://forabeautifulweb.com/blog/about/the_most_effective_de...
Unfortunately I had no success.
Who wants a solid relationship with a sleezebag who tries to get out of debts by claiming "yeah, it may be the same corporate entity, but I'm the new CEO, so I'm not paying?".
You want nothing to do with a person like that.
But I work with some great people that are total jackasses. But they know I'm not going to take their crap, so they don't try and dish it to me. Or sometimes they do, to test the water, and I say 'nope'.
I mean, I hate to be so basic as alpha dog level analysis, but that's how you get through to some people. And I don't mean blustering and cursing up a storm. I mean growing up and dealing with stuff head-on.
_EVERYTHING_ is an opportunity.
debt collectors keep calling when you say you can't make the payment, but as soon as you tell them you are refusing to pay, they will stop calling and close the account because they know there is no way further harassment will get you to give in and pay up.
But in this case it doesn't sound like there is any other choice.
Thus, I disagree with this statement.
http://bit.ly/V9Zg8
The mean limit for all the 50 states is $5964 (more than he'd get from a collections agency). The median is $5000 (also more than he'd get). In particular, in some major tech business jurisdictions:
NY: $5000
WA: $5000
CA: $7500
IL: $10,000
GA: $15,000
(MA is $2k. That sucks, lots of tech companies in MA. On the other hand, PA is $8k.)
Note also that typical fees for collections agencies appear to exceed 50%, and that's a contingency fee.
FWIW: I'm in MA, hence my reference to the 2k limit in my comment elsewhere on this thread.
Your comment about collecting the judgement makes a good point, although I'll point out that it's easier to collect a civil judgement than a debt; judgement debtors can levy bank accounts.
From the Hacker News guidelines:
http://ycombinator.com/newsguidelines.html
"In Comments
"Be civil. Don't say things you wouldn't say in a face to face conversation.
"When disagreeing, please reply to the argument instead of calling names. E.g. 'That is an idiotic thing to say; 1 + 1 is 2, not 3' can be shortened to '1 + 1 is 2, not 3.'"
I always like that it says, "can be shortened to" as a gentle reminder that disagreeing with statements of facts doesn't serve as an excuse to throw in personal insult.
So you both lie and call names.
Delightful.
It looks like he documented that the small claim suit limits are typically considerably higher than the claimed $2-3k. Is he wrong? If not, what lie did he tell?
1) find a lawyer who you can hire for an hour or two for $200-$400. You're paying for his letterhead, not his skills.
2) Get him to write a letter saying "you have 14 days to pay 2/3 of the amount. If we receive that, the debt is discharged in full. IF we don't receive that by 14 days from today, we're going to court, and we're asking for the full amount of the debt, lawyer fees, and damages. Please pay now."
I've collected LOTS of debts in my time, 95% successfully.
This technique works.
Have you ever used a collections agency?
(Not challenging you; you just said you've collected lots of debts, and I'm interested in your experience. I've been a witness to a couple incidents, but I don't have a lot of experience.)
Yes, I've been to small claims court 15-20 times. I won every time.
Folks who force you to go to SCC in the first place tend to be flakes, therefore they tend to not even show up. 75% of the cases that I've had, and that I've witnessed, in SCC, only have 1 party show, and that party wins by default (at least in MA).
> Have you ever used a collections agency?
Not yet. I plan to, though.
Why on Earth not? Make empty threats!
What are you afraid of, that these guys will learn that you're capable of bluffing and then push you around? That appears to have happened already.
Though I actually agree that you shouldn't bluff a lawsuit. You should give fair warning and then file the lawsuit. What are you waiting for, someone to cheat you out of twenty thousand bucks?
I just got off the phone with them. They seemed very professional and they said they typically charge 25-30% of the collected amount, but they usually don't do one-off collections. They typically work with companies that have at least 10-15 non-paying customers.
At a previous company, we hired United Mercantile and they never collected a cent from either of the two accounts we sent them.
They made things up like saying the one guy's corporation was surrendered when it wasn't and on the other one, I later reconciled with customer and he said he NEVER received a single call or letter from them.
Both were relatively small amounts (about $5k and $10k) and it would appear that they never lifted a finger to get their 30% or whatever it was.
I like the lawyer approach -- the more names on their letterhead, the better! :) No company likes the threat of legal action.
Good luck!
Just think about what a collection agency does, they have no special powers, they just start calling people and don't stop. It doesn't take too long to have your (outsourced?) admin go through calling everyone that works there each day.
Name & shame works only when the named party would hurt themselves more by suing you than not.
This guy has a breach of contract case (assuming his ad agreements were written properly): he needs a lawyer. Odds are he will be paid as soon as they get a letter from his attorney. None of this 2/3's stuff either: demand the full amount.
I don't know the details of whats going on here, but from what information I do have, I suggest you work out some other form of payment (with lawyers of course...keep in mind this is to make it easier for them to pay you the $9400 they owe you, you aren't making a "new" deal per say). Instead of forking over $9400 in cash, maybe you could work it out so that company can pay in you $9400 in services, or something along those lines.
If that doesn't work, then by all means sue the guy. You have every right in the world to do so. Don't worry about if it looks "dickish" or not, you need to get that money back in one way or another.
Good luck.