Can anyone recommend a good collection agency?

https://news.ycombinator.com/item?id=567004

by optik • 17 years ago

28 57 17 years ago

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One of our clients owes us ~$9400 in back advertising invoices and refuses to pay us. They are a small company (< 10 people) which recently had a change of leadership. The new CEO did not return my calls for 3 months and the finally told me over the phone he was not going to pay, since it was the old CEO who made the deal with us.

I have an agreement (written by our lawyers) signed by their old CEO which spells out the agreement quite clearly. I've Fed-Ex'd a copy of the agreement and the outstanding invoices to the company and have heard nothing.

I don't have the time to keep pursuing this issue and I would like to pay a collection agency a percentage of any money that they can recover. We are also a small company (< 5 people) and recovering a portion of the $9400 would be significant to us.

Has anyone used a collection agency in the past? Any experiences to share? Can anyone recommend one?

maryrosecook6• 17 years ago

I'm shocked that a small business would think of using a collection agent to get money out of another small business.

First, collection agents are threatening and scary. Their presence will affect both the debtor company and its staff.

Second, by selling your debt to a collection agency, you usually give them the right to sell it to other - perhaps more menacing - organisations.

Third, collection agencies primarily work by first sending scary letters, then visiting the debtor in person, then confiscating things of value. None of these are efficient: the debtor loses far more than they owe, and you don't get all your money back.

tptacek12• 17 years ago

I'm not sure why this is shocking to you; these are all the debtor's problem, not the creditor's. The creditor just wants some return on the debt, and a long-term deterrant to other deadbeats.

I don't know you, but you might be surprised how big an issue this is; back in the '90s, I was a key employee at a regional ISPs, and the deadbeat problem was significant.

The standard answer to this problem seems to be having a lawyer draft a letter (hundreds of dollars) threatening a civil suit, and then actually taking the deadbeat to court. If you think a stern letter will get someone to cough up, this is a fine route to take. If you think it'll require an actual court case, forget it. Business civil suits can take years just to get into a courtroom; if your opponent hires their own lawyer, your odds of winning aren't awesome compared to the investment you'll have to make with your counsel; in the end, if your debtor simply goes out of business, you end up with nothing even if you win.

maryrosecook6• 17 years ago

Deterrent? Why would collecting one debt discourage other debtors? (whoops, I've taken a wrong turn into Alliteration Central).

What I'm getting at is that using a debt collection agency is an exceptionally nasty way to recover money. There are other avenues to explore, one of which was suggested by boredguy8 and another by tjic.

optik5• 17 years ago

I understand that you find collection agencies "scary" but at this point I've exhausted all other avenues. My responsibility is to my company, not their company and staff.

maryrosecook6• 17 years ago

People view debt agencies as a last resort. To me, they are no resort: they are just plain mean. A company being a dick to your company doesn't give your company the moral right to be a dick back.

boredguy8 made an excellent suggestion of an alternative approach.

jm4• 17 years ago

What is this guy supposed to do? Show up with a bouquet of flowers and ask nicely? It sounds like he's already tried the carrot and now it's time for the stick. These people owe almost $10k and basically told him to go piss up a flagpole.

Of course it's going to hurt the other company and its employees, but think about how it's going to affect the submitter's company and small group of employees if they don't get paid for their work. It's a bad situation all around, but it's not the submitter's fault that these people have a employer who doesn't pay bills and he shouldn't have to suffer because of it.

I would probably talk to a lawyer first. For minimal fees you could have a few nastygrams sent out and the threat of a lawsuit might do the trick. If that doesn't work selling the debt to a collection agency for cents on the dollar might be the most cost effective solution.

[edit] Or you could get creative as boredguy8 suggests. I think it's a fantastic idea. It may or may not work, but it doesn't cost much and there's no PR fallout.

nfriedly• 17 years ago

I disagree with you. I think collection agencys and legal battles should be saved for a last resort, but it sounds like they have tried all of the "nicer" methods. The amount is a little too high for small claims court, so I think a debt collection agency is a reasonable choice.

reg4c• 17 years ago

I know this guy Tiny Mike from Chinatown For a small few he could "pay them a visit" and get you back your money with interest.

He charges about one third of what he gets Whadduya think?

boredguy82• 17 years ago

Collection agents aren't how you want to resolve this. Instead you have an opportunity to solidify a relationship and create opportunity by showing you're serious about what you do, and you are worth being paid. Threatening people is hardly ever the right way to accomplish any of your goals

One of the best bosses I know in a rather small manufacturing company, after not being paid for 9 months, called up the CEO of the indebted company and said, "Hey Steve. I need directions from the airport to your office and then from your office to the nearest golf course, because Monday I'm going to fly out there personally, pick up this check, and then go play some golf. Feel free to join me if you want." Not only did he get his money, but the other company realized they were dealing with someone that was going to pursue every issue, no matter how small, and they started ordering far more product.

I'm not saying the exact same approach will work for you (though it could!) -- I'm saying get creative and get serious, and prove it.

His team was already set up to effectively pursue late payments. Less than 1% of their invoices make it past the 90 day mark.

optik5• 17 years ago

I appreciate the technique you are advocating, and I did try something similar based on this link I found on HN a while back:

http://forabeautifulweb.com/blog/about/the_most_effective_de...

Unfortunately I had no success.

tjic6• 17 years ago

> Instead you have an opportunity to solidify a relationship

Who wants a solid relationship with a sleezebag who tries to get out of debts by claiming "yeah, it may be the same corporate entity, but I'm the new CEO, so I'm not paying?".

You want nothing to do with a person like that.

YuriNiyazov2• 17 years ago

In some sense, business is war, according to pre-determined rules; all kinds of saber rattling is acceptable.

boredguy82• 17 years ago

Are you serious? I want a solid relationship with everyone, no matter what they've done in the past. I'm also going to protect that relationship in a legally binding way, and not just take someone's word.

But I work with some great people that are total jackasses. But they know I'm not going to take their crap, so they don't try and dish it to me. Or sometimes they do, to test the water, and I say 'nope'.

I mean, I hate to be so basic as alpha dog level analysis, but that's how you get through to some people. And I don't mean blustering and cursing up a storm. I mean growing up and dealing with stuff head-on.

_EVERYTHING_ is an opportunity.

there• 17 years ago

there is a big difference between a customer who is late on payments (such as in the case you are describing) and one who is flat-out refusing to pay. it sounds like legal intimidation is the only way the original poster is going to get any money out of his former customer.

debt collectors keep calling when you say you can't make the payment, but as soon as you tell them you are refusing to pay, they will stop calling and close the account because they know there is no way further harassment will get you to give in and pay up.

radu_floricica• 17 years ago

There is one thing I agree: threatening people should be done _only_ as a last resort, and only when you are in a position to threaten. Also, if you do it you be prepared to end whatever relationship you have, especially if the threat is unsuccessful.

But in this case it doesn't sound like there is any other choice.

thrill• 17 years ago

You'd be better off actually bringing suit against them to force them into bankruptcy - they will also need to pay you for damages if your paperwork is solid. Collection agencies are highly inefficient.

tptacek12• 17 years ago

The percentage of $9400 you might be able to recover in small claims court probably exceeds the amount you'd get from anyone who would buy your debt.

tjic6• 17 years ago

Most small claims courts cap suite sizes at $2-3k.

Thus, I disagree with this statement.

tptacek12• 17 years ago

Way to just make shit up there, guy.

http://bit.ly/V9Zg8

The mean limit for all the 50 states is $5964 (more than he'd get from a collections agency). The median is $5000 (also more than he'd get). In particular, in some major tech business jurisdictions:

NY: $5000

WA: $5000

CA: $7500

IL: $10,000

GA: $15,000

(MA is $2k. That sucks, lots of tech companies in MA. On the other hand, PA is $8k.)

Note also that typical fees for collections agencies appear to exceed 50%, and that's a contingency fee.

tjic6• 17 years ago

Debt collectors are a reasonable approach, but take one more step before you do that.

1) find a lawyer who you can hire for an hour or two for $200-$400. You're paying for his letterhead, not his skills.

2) Get him to write a letter saying "you have 14 days to pay 2/3 of the amount. If we receive that, the debt is discharged in full. IF we don't receive that by 14 days from today, we're going to court, and we're asking for the full amount of the debt, lawyer fees, and damages. Please pay now."

I've collected LOTS of debts in my time, 95% successfully.

This technique works.

tptacek12• 17 years ago

Have you ever taken someone to court successfully?

Have you ever used a collections agency?

(Not challenging you; you just said you've collected lots of debts, and I'm interested in your experience. I've been a witness to a couple incidents, but I don't have a lot of experience.)

tjic6• 17 years ago

> Have you ever taken someone to court successfully?

Yes, I've been to small claims court 15-20 times. I won every time.

Folks who force you to go to SCC in the first place tend to be flakes, therefore they tend to not even show up. 75% of the cases that I've had, and that I've witnessed, in SCC, only have 1 party show, and that party wins by default (at least in MA).

> Have you ever used a collections agency?

Not yet. I plan to, though.

icey• 17 years ago

I've done something similar to this and it's worked the 2 times I've done it. I think the problem I had was that it was obvious I was a one-man shop and they thought they could push me around. As soon as they realized my lawyers were more expensive than theirs they both changed their tunes very quickly.

optik5• 17 years ago

I think your suggestion is a good one. However, I'm not prepared to spend the time and legal fees to take them to court and I don't make empty threats.

damienkatz• 17 years ago

You don't have to intend to sue, the debt collection agency has that option. And while the collection agency probably won't do that, they might. Never know.

mechanical_fish• 17 years ago

I don't make empty threats.

Why on Earth not? Make empty threats!

What are you afraid of, that these guys will learn that you're capable of bluffing and then push you around? That appears to have happened already.

Though I actually agree that you shouldn't bluff a lawsuit. You should give fair warning and then file the lawsuit. What are you waiting for, someone to cheat you out of twenty thousand bucks?

YuriNiyazov2• 17 years ago

"Progressive Financial" was excellent at getting money out of me when the City of Philadelphia decided to put a lien on my house.

optik5• 17 years ago

Thanks for the reference.

I just got off the phone with them. They seemed very professional and they said they typically charge 25-30% of the collected amount, but they usually don't do one-off collections. They typically work with companies that have at least 10-15 non-paying customers.

idgaf2• 17 years ago

IMHO, COLLECTION AGENCIES DON'T WORK

At a previous company, we hired United Mercantile and they never collected a cent from either of the two accounts we sent them.

They made things up like saying the one guy's corporation was surrendered when it wasn't and on the other one, I later reconciled with customer and he said he NEVER received a single call or letter from them.

Both were relatively small amounts (about $5k and $10k) and it would appear that they never lifted a finger to get their 30% or whatever it was.

I like the lawyer approach -- the more names on their letterhead, the better! :) No company likes the threat of legal action.

Good luck!

optik5• 17 years ago

Did you have to pay anything to the collection agency?

idgaf2• 17 years ago

No, not up front--part of their pitch was "we don't get paid unless you do".

mattmcknight• 17 years ago

What about name and shame? Does everyone know that this company doesn't pay? Do all of their employees know? Does their bank know? Do their customers and other vendors know? The threat of going public might help you, if you know anything about their business.

Just think about what a collection agency does, they have no special powers, they just start calling people and don't stop. It doesn't take too long to have your (outsourced?) admin go through calling everyone that works there each day.

HeyLaughingBoy• 17 years ago

And it can also get you sued for interference of trade.

Name & shame works only when the named party would hurt themselves more by suing you than not.

This guy has a breach of contract case (assuming his ad agreements were written properly): he needs a lawyer. Odds are he will be paid as soon as they get a letter from his attorney. None of this 2/3's stuff either: demand the full amount.

freemanindia• 17 years ago

I'd love to hear advice on hiring a collection agency as well. My lawyer renegotiated terms several times with a guy who defaulted on a business loan I made him. Each time he agreed to a repayment schedule, but never paid anything. My lawyer went to court. The other guy never went, and after a few visits we got a judgement against him. Still there was nothing forcing him to pay. The lawyer went back to court and after more $ I all i was able to do was put a lien against any 'real' property in California he may someday purchase. The next step was to force him to court and audit his accounts 'under oath', but I lost my faith in the whole process.

mynameishere• 17 years ago

Collections agencies are persistent, I'll tell you that much. I've been in the same apartment for 4 years, and for 4 years I've been getting weekly calls for a person who lived here two tenants ago.

checkwit• 17 years ago

I am looking for one too. I have a judgment for over $12K from 2 different tenants. I sent one of them to a collection agency about a year ago. Nothing...

buckwild• 17 years ago

I don't know why the CEO of that company is being that obstinate about paying you money you clearly have rights to (the agreement). Given the fact that he now knows he owes you money, assuming he didn't before (although the old CEO should have filled him in right?), and he still doesn't want to pay makes me think he is going to have trouble coming up with the money, even if he wants to pay you. The economy is... well, you know.

I don't know the details of whats going on here, but from what information I do have, I suggest you work out some other form of payment (with lawyers of course...keep in mind this is to make it easier for them to pay you the $9400 they owe you, you aren't making a "new" deal per say). Instead of forking over $9400 in cash, maybe you could work it out so that company can pay in you $9400 in services, or something along those lines.

If that doesn't work, then by all means sue the guy. You have every right in the world to do so. Don't worry about if it looks "dickish" or not, you need to get that money back in one way or another.

Good luck.

tzury• 17 years ago

too bad the Sopranos are not available anymore ;-)

Can anyone recommend a good collection agency?

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