Choosing, Using, and Enthusing a Collection Agency, Part 1

Jun 7, 2010

If you’ve ever tried to use a collection agency to collect a five-figure placement fee, don’t blame the agency for not collecting. It’s not their bag. It’s like asking a podiatrist to perform brain surgery.

But if your fee — temp or perm — is less than $7,500, you should know how to choose, use, and enthuse a collection agency.

In many cases, you’ll have no choice.

Chances are you won’t be able to find a competent lawyer who’ll collect your fee on a contingency (percentage) basis. That doesn’t mean the lawyer won’t accept it on a contingency basis.

Collection attorneys usually play the numbers and take whatever cases you give them.

But they’re very busy people because successful collections require high volume and an incredible amount of legal time to obtain writs of attachment on assets (prior to judgment), writs of execution on assets (after judgment), and constant court appearances in-between. Commercial debtors are often wily, sophisticated fee-dodgers. The right to a placement fee is difficult to prove — among the most difficult in any generalist’s office.

So while the lawyer might accept your case, the chances are a form “lawyer’s letter” to the employer will be all the action you’ll see. If he files a lawsuit, don’t expect to hear much until a week or so before the trial date.

The lawyer may be extremely competent. His only mistake is playing the numbers by accepting your elusively simple case. Your mistake is that by using him, the employer will identify him with you. Collection agencies are impersonal and they do what they think will recover the debt. Period. That’s the difference between “referring the matter to an attorney” and “as- signing a debt for collection.” Once it’s assigned, you’ve transferred your right to the money in exchange for a percentage of the recovery.

Now you have no excuse for giving these small receivables to a lawyer.


Like collection attorneys, collection agencies operate on volume. However, they avoid filing lawsuits, since it costs them time and money. Even if their lawyer is on a retainer, court systems don’t allow “priority” on the docket based on the amount in controversy. A business dispute waits in line on the trial calendar, regardless of the amount or the solvency of the debtor.

Lawyers would much rather litigate than write letters. They’re like recruiters — much more interested in send-outs than in sending fee schedules.

Collection lawyers use form pleadings for the typical causes of action (breach of contract, open book account, and unjust enrichment). Your Summons and Complaint are indistinguishable from the carpet cleaner’s before and the jewelry store’s after. It’s a paint-by-the-numbers job that can be knocked out much more easily than the detailed, analytical, carefully drafted demand letter a business lawyer would write.

So, like the recruiter who focuses on arranging interviews, the collection lawyer focuses on serving lawsuits. Collection agencies focus on mail, telephone and (occasionally) personal visits to the debtor. Their two main collection techniques are:

a. Fear, and

b. Tenacity.

Of course, sophisticated fee-avoiders are not afraid of form-letter threats or repetitive warnings from volume word-processed factories.


Just Google “collection agencies” and the name of your city. You can also check your local Yellow Pages under “Collection Agencies” or “Collections.” Forget about Chambers of Commerce, Better Business Bureaus or trade associations. You want a junkyard dog, not a PR poodle.

We prefer the smaller agencies, since personalized service is so important to collect placement fees. The optimum size is around six collection desks. This gives you access to management and you can find the most capable collector easily. In larger agencies, the file may go through several collectors before it is closed. While the national agencies sound better because everyone knows who they are, they’re too worried about their image to be effective.

Ask for references of lawyers, accountants and other professionals who service businesses. Then call them. You can also check with your state licensing department regarding pending complaints. The only ones you care about are charges that clients weren’t paid from funds collected.

Otherwise, an active complaint file usually reflects an agency that realizes the benefits of venting your anger. The turnover among collectors is around 95% — similar to that of recruiters — for many of the same reasons. It’s a high-rejection, high-pressure, phone-intensive business with broken promises being the rule rather than the exception.

You can avoid slipping through the cracks by dealing with a small, accessible, local collection agency which will be accountable to you. The best one we know is an old-fashioned, tightly-run, lean-and-mean, four-desk money machine. Still no good for fact-based liability issues, but fine for uncontested slow-pay receivables.

Then handle the relations with the agency personally. Nothing will stop the agency from working faster than constant calls from your placers. Leave the agency alone and be patient. Collecting takes time, since every demand requires negotiation and waiting to see if promises from the employer are kept.

Even the most inept collector has the lawyer’s advantage — he’s more objective than the client. Let this objectivity work for you.

Editor’s note: In tomorrow’s Part 2, look for how collection agencies view debt, and more.