But human touch is still needed


September 16, 1991|By Adriane B. Miller | Adriane B. Miller,Special to The Sun

Companies plagued by past-due accounts take note: Thanks to automation of the collection industry, collection agencies are becoming more efficient at their task, are collecting more debt than ever and are even lowering their fees.

U.S. companies asked collection agencies to help them recover $66.5 billion in delinquent bills in 1990, says the American Collectors Association Inc., a trade group in Minneapolis.

But even with that mountain of debt to deal with, says Michael Sobota, president of ACA's local chapter, "Agencies are so tight with computerization these days, accounts rarely slip through the cracks."

Added his brother, Steve Sobota: "Gone are the bang-on-your-door tactics of the past. The business is becoming more and more professional." The Sobotas operate Pierce, Hamilton and Stern, a collection agency in Bethesda.

As much as 85 percent of collection agencies have become automated in the last decade, according to the association. With computerized data bases, electronic mail, employee training and global cooperation among collection agencies, the industry has become extremely efficient in tracking debtors, even when debtors skip town or change company names.

Because they are more efficient, collection agencies are lowering their fees. Fees charged used to be about 50 percent of the debt to be collected, says Michael Sobota. Now they may be as low as 25 to 30 percent.

"Six years ago, a collector may have been producing gross numbers in collections of $12,000 to $14,000 a month, and that was considered a good month," Mr. Sobota says. "But these days, the same collector sitting in front of a computer is turning numbers of $30,000 and $40,000 a month."

Better training has improved the rate of collections, says Nina Douglas, an ACA spokeswoman. Agencies enroll their employees in seminars that show how to improve customer communications, get motivated, instill positive mental attitudes and comply with the Fair Debt Practices Act -- the federal law that describes how third-party collectors must operate.

"Before, [collectors] would just say, 'you need to pay the money,' " said Ms. Douglas. "Now they might say, 'Let's see how we can help you.' Although they are not in the business of counseling, if a telephone collector needs to do that to get payment, it's OK."

Skip tracing and account forwarding are other collection tactics made easier with computerized data bases and networks.

"ACA members can forward their accounts for collection," she says. "The debtor who believes he is escaping his debts by moving to Kuala Lumpur may be surprised to get a phone call from a collector there."

As efficient as technology has made collection agencies, human contact is still essential, says Lee Snyder, president of Credit Adjustment Bureau of Baltimore and an ACA past president.

"Understanding debtor problems -- it takes a human to do that. Finding a solution -- a computer can't do that either," he said.

When and if companies should turn do-nothing debtors over to a collection firm is an individual decision, says Paul Hartman, president of Adams, Baker & Doyle, a Hagerstown agency.

"They have to look at their staffing, how long they can take someone off sales and put them on collections. But if they haven't collected by somewhere between 90 and 180 days, it is going to be unprofitable for them to try any more by themselves."

Steve Sobota thinks companies should call a collection agency when their debts are between 90 to 120 days past due.

But collection agencies' competitors in the legal profession contend that companies may not need to spend fees as high as those collectors charge. A law firm might actually be cheaper, said B. Marvin Potler, an attorney with Wright, Constable & Skeen in Baltimore.

Some law firms assign legal assistants, who charge considerably less than a lawyer, to collect accounts for their clients, Mr. Potler says.

Even with all their sophisticated methods, collection agencies can't possibly collect all the debt owed to companies, says the ACA.

Of the $66.5 billion in debt given to collection industries to retrieve in 1990, $12.2 billion was collected. Once agencies were paid for their services, about $8 billion was returned to creditors.

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