Starting a collection agency is not a difficult procedure at all; in fact, you can start one directly from your home and then grow your business from there.
A collection agency is a business that provides a service to other companies that need to collect money from customers that are not keeping up with their payments or that are not paying at all.
The agency’s role is to collect the money from the customer and then turn it over to the hiring company, keeping a commission for the service.
In most cases, collection agencies work on the basis of commissions and contingencies, so basically how much you earn will depend on how much money you will be able to collect. You will have plenty of companies wanting to hire you if you work well at your job, so the more money you collect the more work will come in.
You might find it a good idea when first starting off our collection agency to begin from home. You can also open up an office but that means extra expenses and you will have to purchase office equipment whether your work from home or from an office.
You will need a few computers a printer and various stationary items. It is also important you are well versed in the rules dictated by the Fair Debt Collection Practices Act and have a good business and marketing plan. You might also find it useful to purchase debt collection software to help you in your new venture.
Being knowledgeable on the FDCPA is a must as these are rules that you have to follow in order to make sure that all actions you carry out are legal and do not infringe on the debtors’ rights.
There may also be other laws depending on the state you are living in and you will have to check those too.
Never pick up the phone or send a collection letter without triple-checking everything such as any laws on what must be included in a letter, what time you can and cannot call a debtor, what you can and cannot say, and much more.
In the beginning, you will need to build up a customer base and you can do this by finding out who your best customers may be.
These may include businesses that extend credit to customers, meaning those that allow customers to purchase their goods without advance payments, either credit card companies, department stores, or supermarkets to name a few.
Make calls to these various businesses or look through the ads for businesses that need someone for their credit department.
The next step will be deciding what you should charge for your collection services, and the best way is to check on the competition and find out how much they charge.
You can get this information online on various collectors websites, although you will have to check on the services they provide for various prices and if they charge additional fees. Older accounts are harder to collect so it might be a good idea to charge commissions according to the age of the account.
Although setting up a collections agency is straightforward, it is important you have some debt collection experience. You have to know which is the most effective strategy that encourages people to pay, for this is the key to a successful collector business.