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Should I Hire a National or Local Debt Collection Agency?

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When looking for a debt collection agency, many businesses are faced with deciding between a national collection agency or a local one. A national agency offers the ability to reach debtors that have left the area, while a local agency is licensed and versed in the laws of your area. The one that works best for you depends on your business and its needs.

National vs Local Debt Collection

National debt collection, also referred to as nationwide debt collection, is the process of collecting defaulted payments and delinquent debts on a local level, but within the boundaries of one country. National debt collection agencies typically specialize in overdue payments. Local debt collection is specific to an area and does not go beyond the confines of a particular geographic location.

The big difference between the two is in licensing. Licensing and regulation for collection agencies to collect commercial debts vary from state to state, and not all national agencies are licensed in a particular state. This can lead to problems if a national company is collecting their debt with a third-party agency; just because the agency is licensed in some states does not mean it can collect in states where it is not.

Why Choose Local?

More and more consumers are becoming aware of their rights during the debt collections process, which means it is important to hire a properly licensed agency that follows the rules set by the Fair Debt Collection Practices Act (FDCPA). Many states require that debt collection agencies be licensed in that state (or at least bonded) which is not always a guarantee with a national agency. But a reputable, local agency has everything it needs to help collect your debt in the right ways and keep you safe from potential litigation.

Why Choose National?

Most states have different requirements for debt collection, which can make it difficult to find a collection agency you trust in every state. This might seem unnecessary, but many states have rules that stipulate the collector to be in the same state as the debtor, and if the debtor moves that leaves you without a way to collect. National agencies provide better all-over coverage and allow you to work with a group that you know and trust.

What to Look for in a Debt Collection Agency

For successful debt recovery, it is incredibly important that you pick a collection agency that is:

  • FDCPA and industry compliant
  • A specialist in your industry and the ages, sizes, and types of debts therein
  • Nationally or locally bonded, insured, and licensed
  • Transparent

It is also important to work with an agency that charges for their services in a fair and accurate manner. Any agency that meets all of these criteria is worth considering, as it will be able to improve your recovery rate, making sure your business continues to grow.

Scalability is another thing to consider when looking at debt collection agencies. National agencies offer a scalability that local agencies cannot match, which provides national businesses with a better way to collect their debts.

How Much Does it Cost to Hire a Debt Collection Agency?

The cost to hire a debt collection agency is based on the amount of the debts you need collected, the volume (i.e. number) of the debts you need collected, and the agency you choose. The following is a general pricing guide based on industry averages to provide an idea of what you can expect to pay when hiring a debt collection agency:

  • Most debt collection agencies take a percentage of debts collected for their services and charge an average rate between 20 and 50 percent. Remember that the older the account is, the higher the percentage the agency takes, due to the increased difficulty of collecting old debts. This method costs more but typically you only pay on debts collected.
  • Debt collection agencies that charge a flat fee for a fixed number of accounts have an average cost between $10 and $15 per account. This method is not nearly as common.

A collection agency may also charge you for any costs they incur while collecting, such as the cost of background checks and long-distance calls. Always ask exactly what is included in your pricing agreement and whether the agency charges any additional fees for its services.

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