In the face of today’s economic uncertainties, it is more important than ever that companies can count on trusted business relationships. But even when they know their customers well, there will always be some that struggle and fail to pay outstanding invoices.
Our trade credit insurance solutionsare a lifeline in such cases, indemnifying policyholders against invoice defaults, and stepping in to help with the complex and time-consuming process of recovering debts. We apply unrivalled expertise to every stage of that collection process. No matter where in the world a debtor is located, our investigators, negotiators and legal teams help to recover outstanding payments efficiently and in the shortest possible timescales.
To show how that looks in practice, we asked two highly experienced collection officers from Allianz Trade in the USA– Darrel Austin, a recovery specialist for pre-legal collections, and Donald Pope, a senior coordinator in our legal collection department – to share insights into their work and the benefits this brings to clients.
Darrel Austin,
Recovery Specialist for Pre-legal Collections, Allianz Trade in the USA
Donald Pope,
Senior Legal Coordinator, Collections, Allianz Trade in the USA
“The primary role of the collection team is to act as an extension of your credit department,” says Donald. “It takes over when a customer is well-overdue with a significant payment. And in doing so, our experts relieve busy finance teams of the burden of bad debt recovery, saving your company time and money.”
We apply a professional and proven model designed to recover outstanding funds, escalating activity when required.
At the outset, we alert the debtor to the fact that Allianz Trade is now appointed to collect the debt and stresses the need for a quick and positive resolution. However, if that proves fruitless, a collection specialist – such as Darrel – is appointed to the case, who takes a deep dive into the debtor’s background and trading status, drawing on a mix of official company records, detailed online research and locally-gathered intelligence.
The starting point is always understanding the situation – whether the unpaid bill is for $20,000 or $200,000. As Darrel highlights: “The more information you have, the better off you’re going to be. As I learnt early in my career, information is knowledge, knowledge is power, and power leads to the money.”
That knowledge, coupled with our expertise, allows us to address many of the pain points that our clients encounter when they try to collect bad debts themselves. Those challenges include finding ways to access the key decision-makers, assessing the debtor’s ability to make payments, setting appropriate deadlines, and knowing how any associated laws can be applied – while always striking a balance between firmly insisting on the matter being resolved and the need to maintain a positive customer relationship.
“An important part of that information-gathering involves knowing who to target to encourage payment – often the CFO or CEO themselves – and how to get their attention,” he says. “But the approach also has to be diplomatic and respectful. After all, in many cases, these are our client’s valued business partners,” he points out.
“Some clients expect us to go in softly, with more of an ‘audit approach’, because they have a relationship they want to preserve,” says Darrel. “You have to be passionate about helping the debtor to pay and have an open mind, so you understand why they are struggling to do so.”
Armed with that insight, he says he can explore options to reach a payment arrangement or settlement. “But there is no magic wand. You need to judge the possibilities from the debtor’s situation,” says Darrel.
On the other hand, those possibilities may simply not exist, and our teams will draw on their expertise, built across many thousands of cases, to judge when all avenues of pre-legal collection are exhausted — most commonly, when the debtor refuses to co-operate or claims they can’t or won’t pay.
“If a debtor avoids contact, then I have to assume that they don’t want to resolve the situation voluntarily. So I’ll have to do my job, and refer the case to our legal department, which then consults with the client about whether they want to escalate the case,” outlines Darrel.
“That is when our legal debt collection experts take over,” explains Donald. “As legal coordinators, our role is to select a qualified attorney who has the knowledge and experience to represent the client’s interest. Then, throughout the entire legal process, we manage the relationship between the attorney and the client.”
That can involve making recommendations on different courses of action at different stages. “The main options are whether to sue, accept a settlement or close the case as uncollectable debt,” says Donald, who brings 35 years’ experience to the role.
Most commonly, the goal is to resolve a case in the shortest possible period, and “in 30% to 40% of cases, the demand for payment from the attorney results in a payment arrangement,” he adds. “Only in about a quarter of cases do we file a lawsuit, but that should always be the last resort because it’s expensive and very time-consuming. Cases can drag on for years. So, the legal coordinator and the attorney will always seek the client’s authority to negotiate a settlement that’s in their best interest,” says Donald.
That highlights some of the elements that set our collection services apart from much other debt recovery.
“Allianz Trade stands above every other agency I have known during 40 years in the collection business,” says Darrel, pointing to the company’s robust processes, its focus on client service, a deep-rooted professionalism and its global presence.
We have local expertise in more than 55 countries around the world. That means clients don’t need to be experts in the collection practices and legal subtleties of other countries. When seeking to recover a debt internationally, the collection officer in their home country will guide them through the process, while the team in the debtor’s country will pursue the matter locally. That mix of local and global support and expertise allows our clients – wherever they are based – to recover outstanding payments.
“As a team, we have all the tools and support we need to collect,” says Darrel. “That extends from ‘skip tracing’ services and investigative firms for finding debtors whose activities have become opaque, through to specialist insolvency teams who take over the recovery if a supplier files for bankruptcy,” he says.
A key task is to keep the client informed at all times. “Our goal is to always be engaged with the client, so they fully understand the process and the status of a case,” says Donald.
Darrel also tries to convey to clients that it is in their interests to act in a timely fashion. “We encourage clients to recognise a debt early. Some clients (especially in the US) allow the debt to sit for three to six months or even longer before they call us in, which can make the collection job tougher.”
Clearly, what has made the job more difficult over the past year is the Covid-19 pandemic and the ensuing economic fallout. It is a situation that has made having access to a professional debt collection service an even more important asset for our clients.
“Last year was a very trying year,” says Darrel who saw the number of debt cases he manages jump fourfold. “Some debtors, especially those who realised they needed to continue as a valued customer to one of our clients, did pay their bills. But there are many industries that haven’t been doing a whole lot of business due to Covid-19. In those cases, we have still managed to structure payments to keep the case away from legal action,” he says.
Not that legal action has been an easy option. “The pandemic has not been good for legal collections in the US,” says Donald. “All civil cases were paused when the country shut down, which has created a huge backlog in the courts. At the same time, many businesses were forced to close, which caused defaults and delays in payment arrangements as many debtors had little or no income.” But he cautiously predicts that those challenges will ease as economic activity bounces back.
As that occurs, the collections process will increasingly be made more efficient and predictable by advances in digital technologies. For example, we are exploring how artificial intelligence can be used to more accurately forecast the likelihood of a client’s specific debts being paid.
Whatever the scope of the opportunities and challenges, the commitment by the team to collect on the client’s behalf seems unshakeable. As Darrel says: “The reality is you may not be able to collect everything, every time. But you give it your all – on every single account.”
FAQs
What happens when a company sells your debt to a collection agency? ›
The creditor will sell your debt to a collection agency for less than face value, and the collection agency will then try to collect the full debt from you. If you owe a debt, act quickly — preferably before it's sent to a collection agency.
How did debt collectors work? ›Debt collectors are third-party companies that work on behalf of another company to collect debts. If a company works for the original creditor, the creditor pays the debt collector a percentage of the debt collected.
What strategies will you do for successful debt collection? ›- Tip 1: Maintain Consistent Contact.
- Tip 2: Make Payment Terms Clear.
- Tip 3: Make Paying Easy.
- Tip 4: Have Empathy, But Keep it Professional.
- Tip 5: Keep Good Records.
- Tip 6: Centralize Your Debt Collection.
- Tip 7: Check Customer Credit.
They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take. They also cannot make repeated calls over a short period to annoy or harass you. Debt collectors cannot make false or misleading statements.
Do you still have to pay if a company sells your debt? ›If a debt is sold to another company, do I have to pay? Yes. Transfer of debt ownership does not change the fact that you owe the money. Once the creditor has legally sold the debt, you will owe the amount of the debt to whoever purchased it.
Do you have to pay debt that was sold to a collection agency? ›If a debt is sold to another company, do I have to pay? Once your debt has been sold to a debt purchaser you owe them the money, not the original creditor. The debt purchaser must follow the same rules as your original creditor when they collect the debt, and you keep all the same legal rights.
How can I get a collection removed without paying? ›You can ask the creditor — either the original creditor or a debt collector — for what's called a “goodwill deletion.” Write the collector a letter explaining your circumstances and why you would like the debt removed, such as if you're about to apply for a mortgage.
What is the 11 word phrase to stop debt collectors? ›If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
What happens if you never pay collections? ›However, they may file a lawsuit against you to collect the debt, and if the court orders you to appear or to provide certain information but you don't comply, a judge may issue a warrant for your arrest. In some cases, a judge may also issue a warrant if you don't comply with a court-ordered installment plan.
What are the 3 key strategies when it comes to collections? ›- Know your customer's credit history. ...
- Ask for payment right away. ...
- Offer easy payment options. ...
- Communicate with your customer. ...
- Use a collection agency.
What is the most successful collection strategy? ›
One of the most effective collection strategies is to have a robust credit check and onboarding process in place. Ensuring that you do a thorough credit assessment and onboarding while offering goods or services on credit is one of the best strategies to adopt.
What are the 3 main methods for getting out of debt? ›The debt snowball method, debt avalanche method and debt consolidation method are three methods for getting out of debt.
How do you outsmart a debt collector? ›- Keep a record of all communication with debt collectors.
- Send a Debt Validation Letter and force them to verify your debt.
- Write a cease and desist letter.
- Explain the debt is not legitimate.
- Review your credit reports.
- Explain that you cannot afford to pay.
- Don't Admit the Debt. Even if you think you recognize the debt, don't say anything. ...
- Don't provide bank account information or other personal information. ...
- Document any agreements you reach with the debt collector.
The statute of limitations on debt in California is four years, as stated in the state's Code of Civil Procedure § 337, with the clock starting to tick as soon as you miss a payment.
Can I pay the original creditor instead of the collection agency? ›It's possible in some cases to negotiate with a lender to repay a debt after it's already been sent to collections. Working with the original creditor, rather than dealing with debt collectors, can be beneficial.
Can a debt be sold to multiple collection agencies? ›For example, if a collector is unable to make satisfactory arrangements with a consumer after a few months, the individual debt may be bundled with many others and sold to another collection agency. That process can be repeated many times over, even beyond the applicable statute of limitations for the consumer's debt.
What is the best reason to dispute a collection? ›You should dispute a debt if you believe you don't owe it or the information and amount is incorrect. While you can submit your dispute at any time, sending it in writing within 30 days of receiving a validation notice, which can be your initial communication with the debt collector.
What percentage should I offer to settle debt? ›Start by offering cents on every dollar you owe, say around 20 to 25 cents, then 50 cents on every dollar, then 75. The debt collector may still demand to collect the full amount that you owe, but in some cases they may also be willing to take a slightly lower amount that you propose.
Do you actually have to pay collections? ›You're still liable for your bill even after it's sent to a collection agency. Many people don't want to pay collection agencies, perhaps because there's no immediate benefit for paying off the debt—other than ending debt collection calls.
What happens if you never received a debt validation letter? ›
If you don't receive a debt validation letter, or it lacks detail, you can make a debt verification request. You can file a complaint with the Consumer Federal Protection Bureau or the Federal Trade Commission.
Can you make monthly payments to debt collectors? ›If you can't pay a large lump sum, you can ask the collection agency to create a payment plan you can afford. You'll need to negotiate how many payments will be required before the debt is settled.
What are 609 letters? ›A 609 letter is a credit repair method that requests credit bureaus to remove erroneous negative entries from your credit report. It's named after section 609 of the Fair Credit Reporting Act (FCRA), a federal law that protects consumers from unfair credit and collection practices. Written by Natasha Wiebusch, J.D..
Can a collection be removed if paid in full? ›A paid collection account will not disappear from your credit history just because you've paid it off. It will stay there until the statute of limitations has passed, which is at least seven years in most cases. You cannot have it removed by contacting the credit bureaus and requesting it be removed.
What is a drop dead letter? ›You have the right to send what's referred to as a “drop dead letter. '' It's a cease-and-desist motion that will prevent the collector from contacting you again about the debt. Be aware that you still owe the money, and you can be sued for the debt.
What is the 777 rule with debt collectors? ›One of the most rigorous rules in their favor is the 7-in-7 rule. This rule states that a creditor must not contact the person who owes them money more than seven times within a 7-day period. Also, they must not contact the individual within seven days after engaging in a phone conversation about a particular debt.
What is called debt trap? ›Debt-trap diplomacy is a term to describe an international financial relationship where a creditor country or institution extends debt to a borrowing nation partially, or solely, to increase the lender's political leverage.
Can collections hurt you? ›Collection accounts have a significant negative impact on your credit scores. Collections can appear from unsecured accounts, such as credit cards and personal loans. In contrast, secured loans such as mortgages or auto loans that default would involve foreclosure and repossession, respectively.
Why you should never pay a charge off? ›A charge-off can lower your credit score by 50 to 150 points and can also look very bad on your credit report. It signals to potential lenders that you could skip out on your debt obligations for extended periods of time. It also shows that you may never pay debt off if the charge-off remains unpaid.
What are the three C's in debt? ›Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.
What is the end to end collection process? ›
End-to-End Means “Comprehensive”
An end-to-end debt collection service focuses on capturing past due revenue at every step of the client purchasing process. It's a comprehensive service designed to tackle early arrears to the more challenging skip tracing and legal enforcement.
Conduct that would harass, oppress, or abuse any person in connection with the collection of a debt.
How can I speed up my debt collection? ›Some companies have sped up collections simply by changing their billing cycle from twice-a-month to once-a-week. Another idea is to invoice early in the month. Many companies do a once-a-month check run and, if your invoice happens to miss their monthly run, you'll have to wait another 30 days to get paid.
What is a collection strategy? ›A collection strategy sets a standard for how accounts receivable collections will be conducted. When will you be sending out first invoices? How often will you get in contact with your customers? Are you making follow up phone calls? If there is no order, then customers will fall through the cracks.
What are the 5 golden rules for managing debt? ›- Pay ON TIME. Pay your bills and loan repayments on time. ...
- Design a budget and STICK TO IT. ...
- Generate WEALTH. ...
- BE AWARE of major life events affecting lending. ...
- Consider CLOSING STORE CARDS. ...
- MANAGE spending patterns. ...
- PROTECT wealth with insurance. ...
- REVIEW your credit report.
Opt for debt consolidation: One of the best ways to get out of a debt trap is debt consolidation. This means that you can take a new, lower-cost Personal Loan and pay of several of your pending debts. When you consolidate your debt, you are combining multiple debts into a single debt.
What is the key to getting out of debt? ›Make the minimum payments on all of your debts, and then funnel any extra money you have toward paying off your highest-interest debt. Next, concentrate on the debt with the next-highest rate, and so on. Put extra money toward the credit card or debt with the smallest balance.
What tricks do debt collectors use? ›- Excessive Amount of Calls. ...
- Threatening Wage Garnishment. ...
- Stating You Have a Deadline. ...
- Collecting Old Debts. ...
- Pushing You to Pay Your Debt to “Improve Your Credit Score” ...
- Stating They “Do Not Need to Prove Your Debt Exists” ...
- Sharing Your Debt With Family and Friends.
You have the right to tell a debt collector to stop contacting you. If you ask a debt collector to stop all contact – regardless of the communications channel – the collector must stop. Keep in mind, though, that you may still owe the debt.
How do you dodge a collection agency? ›If you believe you do not owe the debt, you should tell the debt collector. If the debt is yours and you can't afford to pay it, you may be able to make arrangements with the debt collector. You can also ask the debt collector in writing to stop contacting you, which will stop the communications.
What's the worst a debt collector can do? ›
- Come to your workplace. Under the FDCPA, it's illegal for a debt collector to come to your workplace to collect payment. ...
- Harass you. Harassment from a debt collector can come in many forms: ...
- Arrest you for debt. ...
- Pursue you for debt you don't owe. ...
- Call you whenever they want.
One controversial tactic in debt collection is a relatively new term, debt shaming. This involves some level of public disclosure by the collector to bring attention to a debtor who has not satisfactorily paid their debt.
What are considered unfair practices by debt collectors? ›A debt collector in collecting a debt, may not harass, oppress, or abuse any person. Specifically, a debt collector may not: Use or threaten to use violence or other criminal means to harm the physical person, reputation, or property of any person.
Does disputing a debt restart the clock? ›Does disputing a debt restart the clock? Disputing the debt doesn't restart the clock unless you admit that the debt is yours. You can get a validation letter in an effort to dispute the debt to prove that the debt is either not yours or is time-barred.
Can a 10 year old debt still be collected? ›Debt collectors may not be able to sue you to collect on old (time-barred) debts, but they may still try to collect on those debts. In California, there is generally a four-year limit for filing a lawsuit to collect a debt based on a written agreement.
Should I pay off a 5 year old collection? ›If you have a collection account that's less than seven years old, you should still pay it off if it's within the statute of limitations. First, a creditor can bring legal action against you, including garnishing your salary or your bank account, at least until the statute of limitations expires.
What are the consequences of not paying a collection agency? ›However, they may file a lawsuit against you to collect the debt, and if the court orders you to appear or to provide certain information but you don't comply, a judge may issue a warrant for your arrest. In some cases, a judge may also issue a warrant if you don't comply with a court-ordered installment plan.
Why shouldn't you pay collections? ›Having an account sent to collections will lead to a negative item on your credit report. The mark is likely to stay on your credit report for up to seven years even if you pay off your debt with the collection agency. It's also possible that paying off your collection account may not increase your credit score.
Do collection agencies give up? ›You are past-due, or delinquent, on your bills and your card issuer's collections representative calls you to pay your overdue balance. After about six months (depending on the lender), they will give up.
What is the safest way to pay a collection agency? ›The most secure way to pay a debt collection agency is by mailing a check with a return receipt. This will prove that the collection agency accepted the check. It costs $1.85 for an electronic receipt and $3.05 for a mailed receipt.
How much will a debt collector settle for? ›
Typical debt settlement offers range from 10% to 50% of the amount you owe. Creditors are under no obligation to accept an offer and reduce your debt, even if you are working with a reputable debt settlement company.
Can I negotiate with collection agency? ›Debtors can negotiate with debt collectors to pay less than the amount they owe. Still, paying the full balance owed may be your best option, especially where your credit score is concerned.
What not to say to a debt collector? ›- Don't Admit the Debt. Even if you think you recognize the debt, don't say anything. ...
- Don't provide bank account information or other personal information. ...
- Document any agreements you reach with the debt collector.
Successfully disputing inaccurate information is the only surefire way to get collections removed from your credit report. If you've repaid a debt and the collection account remains on your credit report, you can request a goodwill deletion from your creditor, though there's no guarantee they'll grant your request.
What is a goodwill letter asking for forgiveness? ›What is a Goodwill letter? Generally, Goodwill letters are also known as forgiveness removal letters. It is a letter you may send to your creditor requesting that they take a bad entry off of your credit reports. You can certainly repair your credit by writing a Goodwill letter to a creditor, which is quite simple.