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A collection (collection) agency is a company that collects overdue debts, usually in the credit sector. For this, a set of measures is used to collect debt by compulsory procedure, usually the goal of pre-trial settlement is set.
Attracting the services of collectors allows you to solve problems with the most inveterate debtors, without spending significant funds. In the eyes of ordinary people, collectors are associated with something terrible, with threats and almost torture.
The image of these people is spoiled by many myths, some of which, for one reason or another, were also born by some heads of collection agencies. Let's consider in more detail the rumors about the work of collectors.
Collectors buy back debts. Recently, there have been reports in the press that collection agencies are buying out their problem debts from credit institutions. Allegedly, there were even bank tenders for which the collectors collected debt packages. Forecasts of work in these areas were also put forward. In fact, the tenders for which the collection agencies received packages of debts, in fact, were shifting debts from one pocket to another. That is, banks cooperated with their "pocket" collectors in order to reduce their own tension due to reserves. As such, there was no tender, usually the collectors received a loan from the same bank, the size of which was equal to the cost of the debt package. Working on the debts, the agency also repaid debts, paying off the loan. Attempts by collectors to work honestly in this market and buy a package have usually been unsuccessful. In general, experts are skeptical about this practice, since everyone should do their own thing. Usually large debt packages are bought up by investment funds, which can finance some programs or transfer them to work for several collection agencies, which usually do not have free funds for capital investments. It is precisely the clearly expressed specialization that allowed the collectors to occupy their successful niche in the market.
Foreign agencies come to the Russian market. Reports began to appear in the press that Western companies were buying stakes in collection agencies. In fact, such phenomena did take place, however, the companies that received Western investments did not receive any qualitative impetus in their development - the volume of their client base remained unchanged, the volume of processed debts also remained unchanged. Analysts are skeptical about the prospect of purchases of some agencies, since they did not have clear development prospects; it is quite possible that the investors were not Western collection funds, but specific people setting certain political goals. By the way, Western agencies operate in the Russian market, for example, the German "Euler Hermes Credit Management" or the well-known company "Cofas", serving individual clients. However, the presence of these companies on the market is not accompanied by fanfare and advertising, promises of market capture. All this testifies to the fact that Western collectors are still only looking at the Russian market, studying its prospects. The situation is reminiscent of the legal sphere, in which there is a huge number of Western serious firms, but in reality only a few work in Russia, serving the largest companies without conquering the market. So Russian collectors should not be afraid of competition from foreign agencies for now.
Collectors work on social networks and blogs. Recently, the blog sphere was shocked by the news that collection agencies went out in search of debtors on the social networks Odnoklassniki and Vkontakte. This news was quickly picked up by journalists and television. In fact, there is no need for collectors to collect information about debtors on social media. The main clients of the agencies are telecom operators, housing and communal services enterprises, credit institutions, which already have the most complete information about the borrower - after all, when receiving, for example, a loan, he fills out a detailed application form, provides his photo. And the essence of the collection itself lies in the debugging and processing of processes, their stereotyped and formalized nature. There is simply no place for such a conveyor for a unique work with a client, as it is fraught with unnecessary waste of time. The agency states have analysts who are looking for information about debtors, including on the Internet, but there is no emphasis on social networks. Sites of courts are checked, reviews are investigated, contacts are searched (phone, e-mail). But such work is individual, rather expensive, since it requires high qualifications and is used only for a small number of clients. The costs of investigations are borne by the agency itself, so it is not profitable for it to use such methods to collect a debt of five to ten thousand. The myth was born by pulling out of an interview with one of the directors of collection agencies the phrase that the search is also being conducted on Odnoklassniki. Then the rumor was replicated and altered by the media, which, for the sake of a cheap sensation, did not delve into the essence of the problem.
Collectors are essentially the same lawyers. It seems to many that the essence of the work of legal and collection firms is no different - both of them negotiate with debtors, if there is no result, then the case is referred to court. This myth is fueled by the fact that initially the collection agencies were built on the basis of legal organizations, the backbone included trained lawyers. In fact, there are significant differences between lawyers and collectors. Lawyers focus on debt collection in court in their work. Pre-trial work consists in drawing up written claims, perhaps there will be one or two meetings with the debtor. The goal of a law firm is to win the court and get a writ of execution from it. Typically, such organizations require an advance payment for work and a certain fee in case of winning the case, while it is not always important for them whether the actual collection of the debt will occur. Collection agencies work in a completely different way. The main thing they rely on is negotiations with the client, creating psychological discomfort in him. Collectors are trying to resolve issues by way of pre-trial collection. At the same time, their actions are standardized, already proven approaches and developments are used. Thus, agencies represent a large conveyor belt for debt collection. The usual practice for collectors is to work without prepayment, the costs are borne and the agency does not receive any compensation in case of a failure, but in case of a win, it is due 15-30% of the collected amount. Drawing an analogy with catering systems, one can compare law firms to a luxury restaurant, where the service is individual and you can order something for the chef. In this light, collection agencies will appear as a fast food system, where everything is fine-tuned, service and results are as fast as possible.
Collectors vie with customer security. Over the long period of existence, collectors have indeed faced negative attitudes from the security services of customers. Moreover, the conversation is not only about skepticism, but also about negative actions that damage the company itself. The reasons actually lie on the surface - security officials believe that, firstly, the collectors take away their earnings, and secondly, if successful, they will demonstrate the inefficiency of internal services. This, in turn, may entail line cleaning or reorganization. Third, the reputation of security personnel who failed to achieve the task will suffer, which is why collectors are perceived as direct competitors, and unfair methods are used to fight them. However, it is necessary to understand that the security service has its own tasks; debt collection is usually not their direct responsibility. And the management usually clearly understands that part of the debts is returned after the very first communication, which means that its own service can cope with this, which does not have to pay interest on the amount returned. Thus, the really problematic part of the debts is transferred to the collectors, which cannot be collected by our own security service. There is no need to worry about your reputation, as collectors specialize in their work, with a wealth of experience. But the security service has no such experience, what's surprising? The attraction and successful work of collectors does not indicate a bad security service, but that collectors have more leverage over debtors. Therefore, it is worth considering the collectors not as competitors, but as assistants for the security services, who solve tasks that they cannot afford or are impractical to perform.
To knock out debts, collectors use irons, bats and other gangster attributes. The first thing that comes to mind when mentioning the collector is a shaven-headed fellow, as if from the 90s, a retrained racketeer. It is even believed that the collectors work themselves on the verge of law. While these stereotypes are wrong, they nonetheless even help agencies to operate. It seems to people that the collectors intimidate debtors, or even apply physical pressure to them. Therefore, many try to pay off debts at the mention of collectors. In fact, agencies collect debts solely on the basis of laws, since their violation will immediately put an end to the activities of the enterprise. To collect a debt of an individual to banks, providers, etc. credit collection technologies are used:
• soft-collection. At this stage, the collection services call the debtors and offer to pay the debt out of court, while the debtor is told all the possible consequences of his evasion from his debts - penalties, restriction of movement, seizure of property. Also used are SMS and e-mails.
• hard-collection. At this stage, there is a personal interaction between the collector and the debtor. The agency is doing everything possible to make a face-to-face meeting take place, and it also practices visits to those who could not be found by phone.
• legal collection. But at this stage, the collectors are already beginning to enforce debt collection, by including purely legal work. Lawsuits are filed, interaction with the courts is taking place. In cases of corporate debt collection, business and financial collection technologies are also launched. At the same time, the debtor's business activity, his connections, contracts are carefully studied, and "painful" points are groped. If you refuse to cooperate, the following measures are applied:
• information and reputation impact. In the media and on the Internet there is information about the unfair behavior of the debtor in matters related to finances, about the deliberate violation of laws by him. This action aims to show the seriousness of the collectors' intentions, however, the "victim" is given time to stop the process until irreparable damage is done to his reputation. Materials for the media are agreed with the customer and submitted on behalf of the agency, which bears reputational risks.
• impact on key contacts of the debtor. At this stage, the debtor's counterparties are informed about his financial problems, about the threats of further cooperation with him, about his failure to fulfill his obligations. Usually, upon learning about this, the counterparties in every possible way seek to terminate contracts and contacts, since no one wants possible litigation with an unreliable partner. And here the debtor has time to stop the mechanisms of influence if he starts paying off the debt.
• use of financial collection. There are times when a person would be willing to pay, but does not have sufficient funds for this. In this case, the collection agency can, after analyzing the debtor's business, help to find sources of funding. It is possible to use leaseback, factoring schemes, brand sale. As you can see, there is nothing to do with gangster methods in the work of collectors. They are competent specialists and good negotiators.
When working with collectors, the debtor is deprived of support for the Consumer Protection Law. Many believe that agencies, in violation of the law, infringe on the rights of debtors, since they can no longer be considered consumers of services. The law defines the relations that arise between sellers and consumers, regulates the possibility of obtaining rights, information about them. At the time of the transfer of the debt to the collectors, the bank fulfilled its obligations to the borrower, but he "consumed" it, but did not pay off. Until the moment the collectors appeared, nothing prevented the client from appealing against violations of his rights. By the time of non-payment, the borrower automatically becomes a violator of the contract and the legislation in force in this field, credit relations, in fact, terminate, legal relations arise regarding the repayment of the debt. The bank transfers the right to this (demand for debt) to the appropriate agency, retaining the remaining rights and obligations. A logical question arises - how does the bank's demand to repay the debt correlate with the "Law on consumer protection"? We are not talking about services or goods, for the quality of which claims may arise, the conversation is about the bank's restoration of its rights violated by the debtor. If the bank has performed its duties improperly, then the borrower may well go to court, despite the fate of debt collection. Therefore, the transfer of debts to collection agencies does not deprive borrowers of the right to use the "Consumer Protection Law". By the way, the effect of this law does not apply to collectors, since they do not provide any services to borrowers, a consumer-executor link is simply not formed.
Collection agencies are unprofitable. You can often hear the heads of collection agencies complain about the unprofitableness of their business, high costs. The meaning of such speeches boils down to the fact that a starting agency needs strong financial support, otherwise a newcomer in the market for these services simply will not survive. However, such statements can be justified either by the incompetence of the management, or by the desire to hide the true picture, scaring away potential competitors. Collection is a type of consulting activity, agencies themselves do not produce any goods, but provide services. Legal, audit, marketing organizations work in a similar way. As in any similar business, the main items of expenses are salaries and premises rent. Funds are also spent on the purchase of programs, office supplies, utility bills and taxes. But the consulting business is traditionally considered to be highly profitable - usually a year after the start of activity.In the collection environment, there are advantages over other organizations of the same kind, since they do not require high-level specialists and with a large salary, like lawyers or auditors. Most of the work is carried out by specially trained employees who are involved in making calls and going to meetings with debtors. Indeed, there are few highly paid employees in the collection - these are analysts, department heads, top management. With the normal setting of the case, skillful planning of expenses, the collection agency will become self-sufficient in nine months. Of course, for the establishment of an enterprise, a clear business plan is needed, you should not rent an expensive office from the very beginning, you should take care of the client base in advance, without grabbing at everything. Failure to comply with these requirements can lead to bankruptcy of the agency, and clients are wary of those who regularly show losses themselves. After all, this speaks either of poor management or of hiding income. Today, collectors have mastered only 70% of the potential Russian market. The corporate debt market is generally underdeveloped. So there is a niche for beginners in which they can prove themselves without taking away the bread from competitors. Conversations about the non-profitability of this type of business are ridiculous.
Collection activities comply with international standards. Representatives of Russian agencies like to mention that their approach to business meets the highest international standards that describe this activity. This hints that their competitors just do not comply with these standards. In fact, there are simply no standards describing collection activities! In the United States, there is a law that regulates the work of collection agencies, the Good Debt Collection Practices Act, but it is only of a national nature, that is, its action is limited to one state. There are no international agreements and declarations on the activities of collectors. There are international organizations that unite collectors from several countries, respectively, certain requirements are put forward for members in terms of the amount of capital, technology, methods, there are their own standards and codes. But in this case it is inappropriate to talk about international standards, since these are, nevertheless, the standards of a separate association. Russian collection agencies, which are part of serious associations, do not just boast of their superiority. By the way, not all domestic collection organizations meet their internal standards. Thus, there is no single high criterion; it is appropriate to talk either about the standards of any country or association.
Collectors work only with citizens who do not pay off loan debts. It is believed that corporate debt is not an occupation for collectors, since the basic principles of the collection services are not associated with them. Recall that collection is the most formalized collection of a large volume of debts, preferably massive, indisputable and of the same type. For some reason, it is believed that such an approach is unacceptable in relation to legal entities, although global trends in the development of collection agencies testify to the opposite. First of all, legal entities may well have typical debts - for rent, communication services or the Internet. Actually, they say that in the data of the debtor, only his name, amount and contract number change. The situation is similar with companies that provide a standard set of services (advertising, lunch delivery, information services). Can such a long time be considered indisputable? Experts believe so. Disputability can also be found in lending to individuals, as they can always say that they did not sign the contract, or they are not satisfied with the interest rate, and so on. But in this case, they themselves will have to prove their case, and in case of failure, the question is automatically closed. Similarly, with the collection of debts for communication services. Billing records the use of services and the subscriber must prove himself that he did not consume them, otherwise he loses the case. In other versions, acts of rendering services, applications and other documents confirming the delivery of goods or consumption of services are usually used. In corporate debts, it is often difficult to talk about mass character, but one can try to formalize debt recovery processes by using certain programs, standard tools, step-by-step actions. Of course, this will take more time than collecting loans from individuals, but collectors can also do this. This approach has successfully proved itself in the West, having received the name of a commercial collection. Even a large IACC association was created, which brings together representatives from more than 20 countries. Thus, foreign collection companies have a much broader view of their range of possibilities than domestic companies. Some collectors are categorical in upholding this myth due to the fact that in the pre-crisis time they received a fairly large amount of work on the debts of individuals. Now the purchasing power of the population has fallen, and the collection of loans has fallen sharply. Therefore, the most entrepreneurial agencies will begin to absorb corporate debt, and the weak ones will simply leave the market.
Collectors are required to undergo personal data protection licensing. Some agencies have loudly announced that they have obtained personal data protection licenses (PDL License). Accordingly, customers were inspired with the idea that it is worth working with these collectors, since others do not have such a necessary license. In this issue, not everything is so simple. First of all, it should be noted that collection activity itself does not need licensing at all. The LPA license as such does not exist either, the activity on the technical protection of information is licensed, for this, by the way, it is necessary to simply comply with the requirements of the law. By the way, it is precisely for collectors that a PDA license is not needed, since one of the information protection requirements in this license is the automation of systems that process data. In a collection agency, such information is not processed automatically, but with the help of call-center employees, lawyers, and exit services. Therefore, the presence of a license of the PDA does not at all guarantee the safety of confidential information. It should be noted that no information leaks from agencies have been registered in the young collector market. It's not about licenses, but about the correct organization of work, control over employees, the use of encrypted data transmission lines, and the application of information security policies. So all the hype about getting licenses is PR in nature, only misleading potential customers. Customers who are concerned about the safety of their information can be advised to visually inspect the agency themselves and pay attention to the following factors:
• availability of its own server, which is not accessible via the Internet;
• server availability for agency employees, differentiation of physical access rights to it;
• the procedure for storing archival files and their availability to ordinary employees;
• the procedure for obtaining information from clients (type of media, encryption);
• access of employees to the Internet and the ability to transfer information there or to external media;
• availability of specialized software products that reflect work with the debtor, their isolation from external influences;
• availability of regulations for internal document flow.
The use of these procedures would not be superfluous to know and some heads of collection agencies. Compliance with these procedures to ensure the safety of personal data is much better than any license. Managers should take into account that talkativeness of their own employees can negate any modern technical means of protection, so it is necessary to build an appropriate system of work with personnel. Taking care of the security of your own information in a collection agency, you should trust your personal feelings about his work, reviews of other clients, and not trust incomprehensible documents.