Aug 13, 2013 Philip Burgess
Since the economic downturn, businesses and consumers have held record high volumes of outstanding loans, which has led to a significant increase in debt collection efforts. As a result, regulators in Washington, especially those from the Federal Trade Commission and Consumer Financial Protection Bureau, have started to roll out new laws and heighten enforcement efforts.
Financial institutions and virtually every other business that needs to obtain outstanding credit in consumer or corporate accounts should consider using debt collection agencies to ensure that all practices are within the confines of the law. The Fair Debt Collection Practices Act can be a tricky regulation to follow, and failure to do so might result in sanctions, hurt reputations, incurred financial losses and other issues.
Agencies on the rise
The La Crosse Tribune recently reported that healthcare systems, as well as organizations in several other industries, are starting to move away from internal collection efforts and toward third-party outsourcing. Economists and analysts have long stated that third-party debt collectors are essential components of the overall financial system and enterprise landscape, as these firms seek out and recover money to help other organizations thrive.
According to the news provider, one Wisconsin-based healthcare provider loses roughly 3 percent of its annual revenues to unpaid debts, though it refuses to change its patient care practices to reduce this figure. Instead, executives of the Winona Health system have chosen to outsource the collections process to third-party firms in efforts to reduce these losses.
The source explained that the leaders of the healthcare provider believe that the cost of doing business has increased in light of recent legislation, while collections practices are also enforced more stringently. These factors served as catalysts for the organization to outsource collection practices to a firm that has a strong track record.
"Collections are what they do full time," Michael Allen, chief financial officer of Winona Health, told the La Crosse Tribune. "They have all these technologies and resources we don't have."
Collectors have started to use more advanced technology to not only reduce internal waste and drive efficiency, but also to increase the overall percentage of successful efforts. The news provider noted that both the healthcare provider and its chosen debt collection agency believe that outstanding debts are hard financial hurdles to overcome for businesses of all sizes.
Collectors as financial saviors?
Investor's Place recently reported that debt collection agencies are raising the bar of financial management substantially, and that experts are suggesting that more companies invest in the services. The source stated that the most effective collection agencies continue to become more valuable with the passing of each year, as those who can balance brand management, legal behaviors and efficient processes grow more quickly than most organizations could in the current economy.
The financial recovery in the United States has led to a variety of new opportunities on which businesses can capitalize. By choosing a proven third-party debt collection service provider, organizations can improve cash flow management and strengthen relationships with customers.