Something changed in the collection industry and something even more dramatic changed in markets collection agencies serve. Not every company was prepared or adjusted for it. In particular, the smaller hometown collection firm has struggled to keep pace with this force of evolution our businesses haven’t seen since the advent of the computer.

First, let’s define a small collection agency for the purposes of this article. In my service to ACA International members as a Certified Instructor for the past 10 years, I have had the chance to meet with hundreds of collection agency professionals from across the country. We talk about their operations, methods, pain points and almost anything and everything debt collectors are involved with. I have taught compliance classes with the phrase “small agency” in the title, and over the years I have noticed a trend. Ten years ago, most of the attendees for these classes were from companies with less than 50 employees, and almost no attendees from companies with 100+ employees. Two years ago I taught a class with over 80 people in it and more than half the attendees worked in companies with over 100 employees and a handful worked for companies over 250 employees. “Small” has grown larger in a very short time!

Next we can look at the industry as a whole and see fewer collection companies in the marketplace. The CFPB reported a 25% decline in companies between 2008 and 2013. IBISWorld reports starting in 2015 to present, the total number of debt collection companies has decreased 3.6%, total revenue is down 2.9%, and total employees has gone down 2.8%. Consolidation in the healthcare and financial markets have had significant impact on industries serving these businesses, and debt collection has been impacted significantly by federal regulations enacted in the past decade. 10 years ago in my home state of Oregon the Oregon Collectors Association had 82 members, this year we will have about 54, down 34%. These were small businesses. In many cases they were family-owned and operated, working with their hospitals and banks and clinics and clients in the towns where they lived, worked and raised families.

Business stands still for no one, even if you have invested your entire life into it, have great relationships with people in your town, know the business better than most, and connect and contribute to all the causes you and your clients care about. I have seen more than a few debt collection companies 25 years old and older not worth anything on the open market. The owners worked and put their life into something that didn’t keep pace with the competition, marketplace, and regulators and now they have little to show for it. What does the “small” agency do to avoid joining the tyrannosaurus, dodo and passenger pigeon?

Keep An Eye on Clients

Do not ignore the writing on the wall. Consolidation, mergers and acquisitions will target all sizes of companies. Plus, federal regulation always brings consolidation in the market being regulated. Maybe your company is “too small” to be directly impacted, but what about your clients? Is the future going to be better for healthcare and financial sector expansion, or continue to challenge hospitals and banks to get bigger and stronger so they don’t fail? The only real protection is to not be overly dependent on a single client for placements or revenue.

Respect Your Relationships

Do not take your relationships with hospital CEOs and bank VPs for granted. They may not be there to make the decision to keep you as their preferred vendor. I cannot list the number of collection agency owners I know who had relationships with great clients for 20+ years see it simply end when the new company took over and brings in an existing relationship with a different, larger firm.

In my experience, the smaller agency owner has always looked at the personal relationships they have with decision makers as protection against being deselected. When the client gets acquired, sold or changed, that person may no longer be the decision maker and relying solely on that relationship won’t help. You must build your company to be the value, not just the handshake of the CEO or administrator. When a new decision maker comes in, you can sell your company’s value, not just the fact you have been there and doing that for 20 years.

Upgrade

Take a serious look at your capabilities. Our clients are evolving and changing into the 21st century and beyond. Our competitors are working on things like artificial intelligence collectors and 24/7 services for the next generations. If you want to work with your clients in the next decade and beyond, you will need to offer services that companies with 500+ employees take for granted. If you work healthcare, can you receive and send daily file transfers to multiple platforms and systems.

If you work financial debt, are you able to meet the compliance and certification requirements like SSAE SOC 2 or more? Is your infrastructure capable of meeting dozens of customizations for each of your clients for reporting, file transfers, security and work protocols? These may not have been the demands of the hometown client and agency in the past, but as consolidation continues it will be the requirements in the future for our clients and their preferred partners.

Maybe your legacy is to transfer your company to your children, sell it to your employees or even sell to a competitor and head to the Caribbean. Take a hard, honest look at where your company will be in ten years if you decide to do nothing and ignore the world around us. Will your company evolve into the next best thing or will it be buried in the wake of change, left to a barren rock pile of other businesses whose owners failed to act?

Brian Watkins is the president of Southern Oregon Credit Service. Starting as a salesperson in the collection industry in 1990, he purchased Southern Oregon Credit Service in 2001.Their largest sectors are healthcare, government and college collections.

The contents of a skip tracer’s toolbox have grown immensely in the last 20 years. For every phone book or directory a tracer used in the past, 50 more digital versions have sprung up in its place. This means tracing is a cinch now, right? If only. It still requires the same amount of resourcefulness, intuition and a fair share of the “knack.” What was once true for tracers 20 years ago, still holds true today: some of the old fashion sources still exist because they still work.

Collection Advisor caught up with the always-on-the-move Michèle Stuart, president and owner of JAG Investigations. Michèle revealed her reliable tracing sources of choice and what it takes to run a great skip tracing office. Collection Advisor also spoke with skip tracing guru Ron Brown, owner of ConSec Investigations and principal at CSI Group. Brown discussed the importance of a strong network and his search for actual treasure on the open range.

How did you get started in skip tracing?

Stuart: I got started in skip tracing in the late ‘80s, early 90’s when I was conducting financial investigations for a company that was contracted by the FDIC/RTC. Back in those days, we didn’t have access to the data systems we have today so locating people (skipping) was a huge part of the research. It was mostly calling people, making connections with others in the skip trace world, sharing contacts, directories and public record searching.

Brown: I got my start in skip tracing doing “fugitive interdiction,” the law enforcement terminology for skip tracing. Same process, same procedures and hopefully the same results.

What methods of growing your network have you found to be the most successful?

Stuart: Networking at training events or conferences has been the best way to meet people. Many of us have talked to the same person for years on the phone and never meet them in person. Meeting them face-to-face at conferences or trade shows, I believe, creates a stronger relationship.

Brown: I have found one of the most important tools of a professional tracer is their ability to establish a network. I have attempted to establish mine by developing every person I meet as a future source. I exchange business cards, write on the back not only the date and place I met the person but also something personal about them. In the beginning I placed the cards in a drawer where it was indexed by the information that person might provide; today I scan the card and keep the data on a thumb drive.

What do you think is a good skip tracing source and/or technique you think collection professionals overlook?

Stuart: I think the most underused sources are good old fashion public records. Many in the industry spend an enormous amount of time on databases. Now don’t get me wrong, they are an incredible tool that I also use; however, not all counties report or sell their data to these databases. Taking the time to look at what is accessible online and/or just a quick phone call can produce information that may not be maintained in the database being utilized for their searches. One example is pet licenses. If a person owns a dog, what do they have to do? License it!

Brown: I think tracers often overlook the open sources in plain sight; the easy sources such as the telephone directory, Google search and credit applications. They tend to make the hunt too complicated. The professional tracer must always remember that the shortest distance between two points is always a straight line, stay away from the tangents.

What is one of the worst mistakes a skip tracer can make and how do you avoid it?

Stuart: I don’t like to reference anything as “the worst” as we all have our own way of skipping. People have different ways to conduct their research, our brains think differently. However, if I wanted to point out something I have seen over and over is the fact that old data is dismissed. Understanding how the Internet works, how information is archived and cross referenced is important. Just because an individual disconnected their phone number doesn’t mean the history associated to that number (and person) is now wiped from the web. I always say in my classes “old is gold.”

Brown: One of the worst mistakes a tracer can make, and not even realize they are doing it, is basing conclusions on assumptions rather than on knowledge, and become skip guessers instead of skip tracers.

What is something creditors can do to ensure easier skip tracing?

Stuart: Collect as much personal data in the beginning of the application stage as you can. Ask for all email addresses used by the subject, ask for all contact and reference phone numbers. Anytime an individual creates a social media account, they have to provide an email address. This will be an important bit of data if the account needs to be skipped at a later date.

Brown: To ensure easier skip tracing the creditors should always review the credit application they receive at the time of the transaction to check for red flags: all references living at the same address or employed at the same place, the employment phone number and the primary contact number being the same. We do a complete seminar for creditors on recognizing red flags on an application. The creditor should scrutinize that application and the information on it as if they were never going to see that consumer again, because in many cases they won’t.

What is the key to running a great skip tracing office?

Stuart: A great office is created by a great boss. What a boss says to his employees becomes their inner voice. Many skip tracers are working hundreds of accounts, with very little time provided for them per account. I have trained hundreds of skip tracers and they are under a lot of stress when it comes to deadlines and client updates. Creating an environment of respect and appreciation makes people work harder, more willing to go the extra mile per se. Also providing them the tools and sources they need to properly conduct their searches is a huge factor.

Brown: The key to running a great skip tracing unit, finding people and things when others cannot, is the constant sharing of sources and ideas. Sources are the key and they are like windows on a house as they constantly open and close. The tracing unit must be able to take advantage of the winds that blow through those open windows.

Describe a particularly challenging skip trace and how you managed location.

Stuart: This is a tough one as I have been conducting research/investigations for 28 years. There isn’t really just one that sticks out. The more difficult skips are the ones that are technologically advanced. They use VoIPs for phone numbers, wipe their social media accounts, manipulate their names, use post office boxes or mail drop centers. Technology is a wonderful tool for us but it also causes a huge problem in trying to locate an individual.

Brown: A particular challenging tracing assignment was the locating and recovering of $12 million worth of road building equipment which had been paid for with a counterfeit cashier’s check. The process entailed networking with sources developed through the years which included but were not limited to the El Paso Intelligence Center (EPIC), U.S. Customs Service, U.S. State Department, U.S. Embassy in Lima Peru and the Peruvian National Police (Policia Nacional de Peru/PNP). Networking with all of these entities and bringing it all together was particularly challenging but led to a very successful outcome.

What do you think the future holds for skip tracing?

Stuart: There will always be a need for skip tracing, whether it be for the location of a debtor or the location of suspect. I believe that skip tracing will always need to advance in training on open sources and social media platforms.

Brown: I think that as long as there are large price items there will have to be credit purchases and as long as items are sold on credit terms there will be people who do not pay and skip out. As long as there are skips there will be a need for professional skip tracers. Our ability to trace has always paralleled our ability to communicate and never have we had the communication tools we have today. The professional tracer must constantly keep track of the new and innovative tools and techniques and move forward with the times, constantly adapting.

What is one tip you would give skip tracers in the current skip tracing/ compliance environment?

Stuart: Never ever friend your debtor [on social media] to obtain information from them.

Brown: In the current skip tracing compliance environment I would provide the tracers with a quotation from Jonathan Swift, “Laws are like cobwebs, which may catch small flies, but let wasps and hornets fly through.” Know the laws which govern your activities, know those laws frontwards and backwards, inside and out. Never break those laws but rather find a legal way to navigate through them.

What do you like to do in your free time?

Stuart: Sleep, LOL. I was on the road over 250 days last year. If I actually can get a whole week off, I like to relax on a private beach somewhere with no computer or cell phone. Realistically, the beach can happen but the no computer or phone never happens.

Brown: In my free time, when I have free time, I like to ride my Harley-Davidson to my ranch, the Bar-B-Bar Almosta Ranch, saddle up my horse and ride out searching for the lost treasures of the James Gang, the Doolin Brothers and the many other outlaws who secreted their stolen treasures in the hills and mesas of Oklahoma. Now that is real skip tracing.

A rash of cases coming out of the District Courts in the Third Circuit (Pennsylvania and New Jersey) suggest debt collection companies violate the FDCPA by providing to consumers a required notice written by Congress. You might have to read the first sentence again. It is hard to believe that a business who follows the law and includes a notice verbatim from a statute could be found in violation of that statute for providing the required notice. It happened in Henry v. Radius Global Solutions, LLC, Guzman v. HOVG, LLC and others.

The real absurdity is these cases actually make it harder on consumers to dispute. This is counter-productive. Debt collection companies do not want to make it difficult for consumers to dispute. Collection agencies prefer to know when a consumer disputes a debt as soon as possible so that they can resolve the dispute. Best practices, in fact, demonstrate that agencies across the United States offer easy ways for consumers to dispute, including but not limited to: email, phone calls, through a website, even by text message. Nevertheless, these cases out of the Third Circuit suggest an agency should tell a consumer that they have to dispute in writing.

These cases arose from Cadillo v. Stoneleigh Recovery Associates, LLC, a case still pending in the District of New Jersey. Stoneleigh moved to dismiss the lawsuit for failure to state a claim. Cadillo contended that the last sentence of Stoneleigh’s letter providing a phone number, hours of operation, and a statement to “call with questions” overshadowed the validation notice which requires a consumer to dispute in writing. The Court did not agree and rejected Cadillo’s claim about the last sentence. But, the Court did something unique, finding the case could not be dismissed because the content of the notice itself—in particular the word “if”—could confuse the least sophisticated consumer about the requirement to dispute in writing.

Congress wrote three separate sentences that make up the validation notice of section 1692g(a). In the very first of the three sentences, Congress did not use the words “in writing.”

Section 1692g(a)(3) reads: “unless the consumer, within thirty days after receipt of the notice disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”

Section 1692g(a)(4) says: “if the consumer notifies the debt collection in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt . . . .”

Section 1692g(a)(5) reads: “upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.”

Putting all these sentences together, debt collectors have always copied the language verbatim from the statute providing the following “validation notice” to consumers:

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt, or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice that you dispute the validity of this debt, or any portion thereof, this office will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification. If you request of this office in writing within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.

The Cadillo Court came to its decision because of Graziano v. Harrison, a Third Circuit case, where a debt collector added the words “in writing” to the first sentence of the notice—even though those words are not in section 1692g(a)(3). The Graziano court held the notice did not violate the statute because Congress probably forgot the words “in writing” since they appear in sections (4) and (5). Putting aside the long-standing legal rule that if a word is missing from a statute, you must presume Congress intentionally left it out; nothing in Graziano suggests that a debt collector should add words into the statute. And, of course, several other Circuit Courts held Congress left it out on purpose so, basically everywhere else in the country a consumer does not have to dispute “in writing” to trigger their 1692g(a)(3) rights.

But after Cadillo, not only are agencies facing copy-cat cases alleging the word “if” in the validation notice violates the statute, but new riffs on that claim, like, permitting a consumer to dispute through a website violates the FDCPA in the Third Circuit because it is not “in writing.” Just because a collection agency offers a consumer a quick and convenient way to dispute (like through a website or by email) does not on its face violate the statute especially as those options require the consumer to “write.” These cases are on appeal. In the meantime, debt collectors continue to get sued for providing the required notice as written by Congress.

Kelly Knepper-Stephens is Vice President of Legal & Compliance for TrueAccord. Her work focuses on government regulation, compliance, and civil litigation. Kelly serves on the Board of Directors for the Receivables Management Association International and is an ACA Certified Instructor.

Many consumers are seeing a sudden inflow of money due to tax refunds this time of year. This provides plenty of opportunity for collection professionals to help empower consumers to take control of their financial situation and use their refund to remedy their debt problems once and for all. Collection Advisor worked with Afni’s training team and Jeffrey S. Simendinger, cofounder and chief operating officer of SIMM Associates to develop key tips, questions and a tax refund schedule to help your tax season collection efforts.

12 Tax Season Income Question Tips

How much will a consumer’s refund be? Here are some great questions collection professionals can use to ascertain the consumer’s ability to pay and help a consumer get the maximum return. Note question tips that are followed by the tax credit applicable to each situation or an appropriate question.

1. Did you worked in 2018? (earned income credit)
2. When do you file your taxes?
3. How many children are you filing for? (child tax credit) (daycare credit) (adoption credit)
4. Did you go to college in 2018? (college tax credit)
5. Are you a homeowner? (Mortgage interest credit)
6. Are you retired or on disability? (65 or older receives a tax credit) (credit ranges between $3,750-$7,500)
7. On average how much do you expect your return to be?
8. Who are you filing your taxes with?
9. Down payment? (How much can you put down today?)
10. A small payment? (“We can do $50.00 payments until you get your tax return.”)
11. Ask for postdated checks. (“I can postdate the remainder balance for February/ March.”)
12. Who in your family is getting a tax return? (Mom, Dad, spouse, sibling)

6 Terrific Tax Time Talk-Offs

Six talk-off suggestions for collection professionals will help consumers realize what a lifesaver a tax refund can be for their financial situation.

1. “Using your tax refund to take care of this debt will save you from having to use money out of your current budget. Just think of it as extra money. You won’t really miss it.”
2. “You may never have a better opportunity to get this debt resolved than you have right now using your tax refund.”
3. “You could really help yourself by using your tax refund to get this debt taken care of.”
4. “Using your tax refund to pay off this debt will help you to start the new year with a clean slate.”
5. “Many tax preparers advance the refund to you. You can get an advance on your expected tax refund and pay off this debt once and for all.”
6. “This is the time of year everyone waits for to pay off bills. Let’s not lose this opportunity to finally get this resolved.”

6 More Helpful Hints

Here are some additional tax season hints that collection professionals should always consider when working with consumers.

1. Push for down payments with a payment plan based on a final payment next month when the consumer gets his/her tax refund.
2. Suggest potential money sources.
3. Find out when the consumer gets his/her bonus from work. Set up a down payment and post date the rest for then.
4. Be creative and think outside the box. Make closing the account a team effort with the consumer.
5. Always push for a down payment.
6. Always sell benefits of paying the account off.

2 Frequently Asked Questions

Different situations with consumers can bring about some interesting questions from professionals on the collection floor. Here are some responses to frequently asked questions.

1. What if the consumer tells me they haven’t filed because of not receiving their W-2 Form? Employers are required to mail W-2 Forms by January 31. The consumer should first contact their place of employment and check the address where the company sent their W-2 Form. Consumers may also have access to their W-2 form online with their employer. Consumers can also call the IRS at 1-800- 829-1040 to get a copy of their W-2 Form.
2. Should I always bring up the “tax refund” conversation to the consumer? Yes. Always assume the consumer is filing taxes and getting a rapid refund. So ask, “When will you be getting your tax refund back?” rather than asking, “Are you getting a tax refund?”

Letter Campaigns

Another way to help consumers resolve their debt during tax season is with a strategic letter campaign. “Tax season settlement letter campaigns are another must to take advantage of any extra money a consumer may have at their disposal,” said Simendinger. “Those letters can be sent via regular mail or by email depending on client covenants and the agency’s available technology. This strategy is something that we’ve done every year during our entire 27-year history.”

Tax Return Schedule

Awareness of when tax return payments are made based on the date the return was submitted can be a great asset to collection professionals. It can help with negotiation and the scheduling of payments. Listed online is an estimation of refund payment dates based on the date the tax return was accepted by the IRS. The schedule has been created based on previous tax refund schedules released by the IRS.

- Click here for the tax return schedule (Collection Advisor Professional Network Members Only) -