Despite the fact that many of our organizations share a common culture on the collection floor, there are often many variables that can differentiate one collection office from another. For example, do you maintain a customer service oriented approach or a more aggressive stance in your talk offs? Are you more letterfocused or telephone-focused? Do you stop calling at 5:00 p.m. or continue to call until 9:00 p.m. the consumer’s time? Do you use a predictive dialer or do you manually dial? Do you leave messages for consumers and if so what kind of message? Do you litigate consumer accounts? Are you a payment in full firm or do you work on payment plans to accommodate consumer’s financial needs? The list goes on and on.
Typically, most of us that write in the collection space work off of a foundation of consumer collections. Whether we are benchmarking, training, understanding compliance or navigating our way through technology, our examples usually surround the dynamics of the consumer collection office. Today, as we have featured in many recent Collection Advisor columns, the consumer collection space is fraught with regulatory challenges on both the federal and state levels, increasing numbers of predatory consumer attorneys and continually decreasing fees as our liquidations diminish to all time lows.
Maybe it is time for a change of focus? There is a minority segment of the collection industry that targets solely commercial claims, defined as businesses that owe other businesses money. They are often smaller organizations that list low numbers of accounts with much larger balances than the consumer space. If your organization, like many others, is looking at new markets to explore, perhaps the commercial collection market might be a good alternative. Here are some reasons why some collectors prefer the commercial niche:
Low Account Volumes
Traditionally, consumer firms list high volumes of low balance accounts, especially those that target the medical industry. In the commercial market the account volumes are low but the balances are high. A collector can work each account on a project basis and really dive into various recovery avenues.
Quicker Account Resolutions
Typically commercial collectors are able to make a fairly quick assessment relative to the collectability of each account. Through investigations, online resources and the ability to talk to anyone in the commercial entities office they can decide on a number of potential collection avenues.
Few Regulations
The CFPB, the FDCPA, the FCRA and a host of other consumer collection regulations and regulators do not target the commercial space. Commercial collectors typically do not experience the same compliance trials and tribulations of the consumer agency. This affords more leverage in the collection process and less time implementing the present layers of compliance standards experienced in most collection firms.
Fewer Collectors
A typical commercial office can operate with far fewer collection staff members due to the lower account volumes. When a collector reaches success on a claim, the financial reward is much greater.
Law Firm Partnering
Many consumer firms have an active litigation model that becomes part of the goal structure of front line collectors. Collectors refer accounts to the agency’s legal facilitation department for funneling to attorneys. The percentage of consumers sued is relatively low compared to the volumes. In commercial collections, many firms sue a large percentage of accounts placed for collection. Once again, the large balances make the financial reward much greater on a case-by-case basis.
These are just a few of the reasons that some operators are looking to the commercial space. If you would like more information on the commercial collection market I would recommend contacting the International Association of Commercial Collectors, Inc. at www.commercialcollector.com. This well known organization can help you better understand the opportunities and dynamics of this profitable market.
As the famous poem by Robert Frost, The Road Not Taken, concludes:
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I,
I took the one less traveled by–
And that has made all the difference.
Perhaps a change in your market focus will make the difference needed to propel your organization to new heights.
We encourage our readers to submit a “best practice” idea for inclusion in this column. Until next time, I’m in a collection office near you!
Harry A. Strausser III is president of Remit Corporation/Interact Training & Development.