If you get a phonecall from anyone offering to do debt collection for you, for goodness sake make sure you know exactly who you are dealing with before you give them any business. Here is how the debt collection scam works.
You get a phone call offering to do your debt collections, normally on a commission only basis. You only pay a percentage of what they collect (or more to the point, they'll pay over what they collect less their commission).
If you are interested (and typically they are pretty persistent), they will stress that once you hand a matter over you may not accept or discuss anything with the debtor - all enquiries by the debtor must be referred to the debt collection agency.
You then give the details of the monies you want collected and they start sending out letters of demand.
Nothing too ominous so far, but here is where the fun starts. Ask yourself this:
How often do you communicate with your bad debtors once you hand them over for collection?
How would you know if your bad debtor had in fact made a payment to the collection agency and the agency hadn't told you about it?
In December last year I handed over a few matters to a particularly persistent crowd called Parker Dlamini and Associates. Within days we had a few irate phonecalls and even received two payments directly into our bank account, so it was clear they were getting on with it. Only a matter of time before the money rolled in... Or so I thought.
In February I asked for a progress report and after a number of requests got one. Each matter was listed as at some stage of collection, but no monies received so far.
In April we did a statement run and in our haste to get the statements out we failed to pull the "in collections" statements from the batch - all the statements went out including those in collection.
Imagine our surprise when we got a letter back from one of our bad debtors saying they had settled and paid our lawyers 50% of the amount owed in full and final settlement in December as agreed, and included all correspondence and proof of EFT to the bank account account Parker Dlamini had specified to them. According to the Parker Dlamini collections report in February this debtor was at the "summons issued" stage.
I tried calling Parker Dlamini - telephone disconnected.
I went to their offices - cleared out. All that was left was the cheap company sign on the door.
I went over all the correspondence, did as much tracking as I could and found the whole thing was a scam.
And oh how sweet is this scam.
As a creditor we gave every last detail of why we were owed the money and who owed us.
The debt collection operation has all the ammunition they need to rattle the debtor into submission.
The debtor sees the chance to settle the bill at half of what they owe (and they know they owe the money).
Who wouldn't jump at the chance to settle at half the price, especially if it was a fairly big bill?
I was thinking it must take a tight ship to run this operation on 15% comm no matter how far they had to take it to get the money.
Ducking with 100% of whatever is collected for the cost of some letters? Now that's really good money!
By strange coincidence we now have a new crowd calling to do our debt collection. I asked who were the principals - apparently at this stage the owners do not wish to reveal who they are
My lessons learnt:
- FICA anyone or any organisation you consider using for debt collection.
- Keep sending statements no matter what.
Any other suggestions or tips out there?
Reply With Quote
Did you like this article? Share it with your favourite social network.