A publication for Credit and Finance Professionals
Why should a creditor use a Collection agency when handling legal collections, instead of going directly to a law firm?
by Thomas W. Hamilton
Collection agencies have a unique ability to service legal collections because of their expertise in the field, the volume of legal matters that they handle, and the resources they have available.
Agencies obtain legal services through the use of a law list. These lists provide a network of law firms who specialize in handling collection matters and provide their services on a contingency fee basis. These law firms work with an agency within a strict set of rules (Operative Guides set forth by the Commercial Law League of America) and abide by the usual and customary practices peculiar to the collection industry, which assures a high level of service.
Furthermore, these agency-employed law firms are carefully screened by the list, which provides bonding coverage up to $3,500,000 to agencies on all matters forwarded through this medium. Thus, the creditors are protected against the possibility of any loss due to fraudulent or deceitful acts. This bonding coverage is available only to collection agencies and law firms, not direct to creditors. As a result of this bonding insurance coverage, the law lists continuously monitor and evaluate the performance of their listed law firms.
These law firms receive a large volume of business from participating collection agencies, which represent many creditors. The potential to bestow large volumes of business affords these agencies leverage with law firms that a single creditor cannot obtain. Particularly in a remote area, you may have a case or two to place, whereas an agency may have many such matters to place on behalf of all of its legal collections clients.
In turn, the volume of business flowing to the law firm via law lists because of its use by an agency gives even more leverage to the list. Millions of cases flow from agencies through bonded law lists to their network of law firms. The leverage of such a list becomes available to the agency on behalf of you, the creditor.
Such leverage has many advantages. You benefit from the experienced maintenance services they perform on your behalf at essentially no cost. You save personnel costs, rent, technological equipment costs, and other variable costs such as postage and stationery.
Access to top-notch legal services is another advantage. The volume of claims handled by these firms gives them intense experience as collection specialists. They know debtors, as well as their evasive tactics; they may have even already had experience with the particular debtor with whom you have a claim. An experienced collections law firm can often settle a case or even bring it to trial without the necessity of your providing witnesses.
The volume provided by collection agencies makes the relationship profitable for these law firms, and thus, they commit all available resources to their collection practices, which include superior technology, their dedicated legal collections staff, and prioritized partner time. Law firms which process volumes of collection files over an extended period of time become ever-committed to this practice and often establish a reputation with local debtors. This reputation can eliminate a lot of "stall tactics" and increase the probability of settling your cases without protracted litigation.
Firms that process a large volume of collection matters may also develop specializations within the field, giving them expertise at handling claims involving specifications such as the Miller Act, the insurance industry, subrogation, transportation, or healthcare.
Agencies also have personnel that are involved solely with legal collections. Their legal departments handle hundreds of files each year. They develop professional, and oftentimes personal, relationships with the attorneys they use on a continual basis. They are active in associations that provide them with continuing education on the ever-changing laws that deal with collections and bankruptcy. Many of these organizations also afford them the opportunity to network with receiving attorneys.
Yes, there are many advantages afforded by the use a Collection agency and its network of law firms to collect your legal accounts receivables. Your claims are bonded, screened, and monitored on a continuous basis by both the agency and the law list. As stated, agencies and their correspondent law firms are specialists in collections. They are educated and experienced in the latest changes to applicable laws and have the latest credit and collection services/technologies at their disposal.
It only makes sense that you will increase your chances of more timely and affordable collection, thus having a positive impact on your bottom line as a result of your decision to outsource your legal receivables to a Collection agency.
