"If you're any kind of business that extends credit, at some point or another you're going to need to employ a collection agency," says the president of an Idaho debt-collection business.
No one wants to hear from a debt-collection agency - except the businesses the agency is working for.
In 2012, Credit Bureau of Lewiston-Clarkston Inc. recovered more than $3 million for local clients, money those businesses might never have seen otherwise.
Troy Ledgerwood, president of the Credit Bureau of Lewiston-Clarkston, has sympathy for those who owe. "It's tough, because there's a lot of really sad stories," he said.
But he also has a job to do - and clients who benefit when his debt-collection business is successful.
Ledgerwood, the 2012-13 secretary-treasurer of the Idaho Collectors Association Inc., said he's seen studies showing recovery rates for national debt collection companies averaging between 11 percent and 15 percent, but his agency's recovery rate is between 30 percent and 35 percent. He says that is good news for local businesses and ultimately for local consumers, since getting back more of what they are owed helps business owners keep prices low.
Debt collectors in Idaho must be licensed by the state Department of Finance.
Q: What is the process for debt collection?
A: In a nutshell, most of what we do is: An account is listed with us by a client, and they say, "This is who owes us, this is how much they owe, this is what it's for," and then we take over the collection of that account for that client.
We will send letters, make phone calls, try and contact the person - if we don't have good information, maybe pull a credit reporting update to see if there's an updated address. We do what we can to try to contact that person and then work out some sort of payment plan, either a payment in full or setting up some sort of repayment plan over time to get that account paid off.
Q: How do you, as an agency, get paid?
A: It's completely a contingency basis. We don't charge a dime to our clients - they pay no upfront fees, they pay no costs. They just turn over the account to us and give us a shot at collecting it for them. If we collect something, we keep a percentage of it for our efforts, and then return the remainder back to the client.
Q: What kinds of businesses need debt collection services?
A: We collect debts for pretty much everything under the sun, from bad checks for restaurants and businesses to medical/health-care, utilities, court fines, traffic fines, auto repair - you name it.
It's one of those things that a lot of business owners don't think about when they're starting a business. You don't realize until you need it that, if you're any kind of business that extends credit, at some point or another you're going to need to employ a collection agency. Because there's always going to be somebody out there for whatever reason - good, bad, nefarious, otherwise - who will not be able to pay that account. And that business owner will have to address that or eat the money.
Q: Does recovering that money become even more important to businesses during tough economic times?
A: Right. And a business owner who has a delinquent account, the only way they can deal with that is either, A, increase their prices to make up for it or B, take the hit themselves and lose money. So by collecting that money and returning it to those clients, we're helping keep down everybody else's costs and keeping more money with these business owners so they can stay in business.
I always say it's more important to get paid for the work you've already done and for the products you've already sold, created or built than it is to bring in new business, because that new business hasn't cost you anything yet.
Q: What are the primary reasons for overdue accounts?
A: There are the people who have had some sort of financial hardship - a lot of times it's people who've had job loss or hours cut back. We've seen a lot of that over the last few years with the way the economy went. A lot of people's hours were cut, their wages were cut, they were bringing home less money and they just got in a position where they were living at one level and all of a sudden they had to adjust to a new level.
There are people who just plain aren't good with keeping track of their finances, and they dig themselves into a hole or they just overspend, live beyond their means - or even sometimes just lose track of it, and then once they find out they owe, it's, "Oh, I'm so sorry. I didn't mean for that to happen."
And then there is that small amount of people who are just fraudulent. But that's not very common.
Q: How would you describe your agency's approach to debt collection?
A: We really realize that, because we're operating in a local community, with local businesses, we are a representative for those businesses, and we know that we have to maintain people's opinion of them - we're a reflection of them. So it benefits us more to treat people with respect and dignity and kindness and try to work with them, because we're going to, more than likely, continue working with that business and probably continue working with that consumer.
Q: Is it difficult to maintain a balance between sympathizing with people's situations and your goal of collecting as much of what they owe as possible?
A: When I first started, I wanted to help everyone - "Oh, you know, I'll give you another chance."
After a while you start hearing the same response over and over and over, and you start going, "Wait, I've heard that before - I know what's going to happen here, and so I'm not thinking I should do that this time."
So, yeah, you do develop a bit of a thick skin, and you have to. But at the same time you do have to maintain that empathy and understanding, because, like I said, a lot of times we're going to deal with these people more than once.
Honestly, it benefits us more to work with the person and come to that understanding, because we both want the same goal: We want to pay off that debt.
Q: A lot has changed about your business over the past 90 years, including the very nature of the services it provides, going from a credit bureau to a debt-collection agency. One thing that's been consistent is that your service is local. Are local collection agencies still the norm?
A: Historically, yes. Every community had their local collection agency, and they worked with the local community and maybe the surrounding area. Starting in the 2000s, where the economy was really booming, you started seeing more really large collection agencies going for the big, nationwide clients - your credit-card companies and your large-industry type of clients. There was a push toward more of this, "Hey, we'll just cover everything and set up a call center with 500 people in India and do it that way, over the phone."
There were a lot of smaller agencies that got eaten up over the years by these larger firms. There are still quite a few small ones - there's one in just about every town - but there's definitely this battle, kind of a push and shove, trying to remind local people that you're going to have a lot better success with a local agency than you are with these guys who have a call center using automated phone messages, placing calls nationwide.
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