The time has come to look inward and see what your collection methods still need to include. Where is your A/R suffering, why, and what can you do to repair the damage? The answer is investing in first-party collections for your business.
The CFPB (Consumer Financial Protection Bureau) recently released a report on the 2018 Fair Debt Collection Practices Act and revealed that debtors registered 81,500 complaints against debt collectors in a year, which means that there is a widening gap between the strategies implemented by collection agencies and the impressions that they are leaving on people in debt.
To remedy that, there has been a more significant turn towards first-party collections to revive A/R and ensure a healthier relationship with clients for all kinds of companies. It is time you address your struggles and consider first-party debt collection methods to revive your A/R. So, let’s learn how you can do that with first-party collection services, and what they are.
What are First Party Collections?
As the name suggests, first-party collections are a method of collection where a company either collects on their A/R, independently utilizes automated software, or hires a collection agency to collect on behalf of the company. Most businesses would prefer their collection methods to be fruitful but legitimate and effective, and that becomes difficult when you outsource collection to another entity entirely.
So, first-party collections enable a company to avail collection services from an entity that collects on behalf of or as the company itself. First-party – meaning the debtor believes that it is indeed the actual company contacting them for collections rather than someone else. Such practices inculcate a trust factor with debtors, and they are more inclined to pay and resolve disputes amicably.
How do You Hire a First Party Collection Agency?
- Based on the size of your enterprise, you can find numerous options of debt collection agencies that deal in first-party experiences.
- You will outline your A/R needs for them and specify how many accounts you must collect and how much revenue is tied up in these accounts.
- They will take on the job of collecting accounts on your behalf by either using your brand name or identity.
- The debtors will be contacted on behalf of the company or as the company, and they will collect the accounts.
Now, what is the purpose of doing this and why does it work? There is an extensive psychological factor to it as well. A person who must pay a debt is under the stress of meeting that expectation. An agency that demands debt will have to employ several ways to chase that debt and recover it.
Does FDCPA Apply First-Party Collections to the Same Restrictions?
The FDCPA is responsible for upholding the law when it comes to collections. They have strict policies against violations and transgressions to protect consumers from harassment, abuse, threats, and below-the-belt treatment to coerce and recover debt.
Typically, when a separate entity takes on the task of doing this job, they are free to use whatever strategy they have and there is little that the original company can do about it. The lack of supervision often leads to third-party collectors committing violations against FDCPA rules and regulations.
So, the first-party collections FDCPA laws are far more evolved and fairer when it comes to collection methods. They are not subjected to the same strictness by FDCPA as third-party collections. And out of the 81,500 complaints mentioned above, most of them are from third-party collectors. With the brand name and identity at stake, collectors and agencies are far more cautious in dealing with debtors, and they are cognizant of the consequences of breaking the law in any way to recover accounts.
First Party Collections: How to Survive the Regulations
There is a remarkable similarity between why people prefer first-party collection experiences and why first-party collections have fewer restrictions on them when it comes to FDCPA regulations.
First-party collection rules encourage techniques that are cordial, effective, communicative, and encouraging and implement positive, reaffirming strategies to collect debt that foster a healthy relationship with clients. Here is how the first-party collection experience varies from third-party collections:
Gentle, cordial communication instead of threats and coercion:
First-party collectors will use cordial language when contacting debtors for payment. They keep their tone and words as polite as possible to establish trust with the consumers and encourage them to level out the payer–payee dynamic.
Negotiating payment options and leeway:
They understand the individual struggle of each debtor and identify their critical problems with non-payment. By exercising empathy, they ensure that every person has an option of making payments on their acceptable terms and has the space to negotiate what those terms are.
Exploring diverse options before resorting to litigation:
One of the most used techniques in collections by third-party collectors is threatening legal action against a non-paying account. Escalating the accounts to collections or litigation always ends up souring the company’s relationship with the consumer, which is hard to reverse.
First-party collectors will conduct employment research to identify how much a person makes and what assets they have before considering litigation for non-paying accounts. They devise ways to collect payment without employing drastic measures, and often, the simple act of going the extra mile saves them from FDCPA violations common in third-party collections.
Prioritize the Health of Your Business, Choose First Party Collections
Now that you know the difference between the two collection methods, it will be easy to decide how to manage your A/R and why that should be through first-party collections. There is mounting evidence that first-party collections get fewer fines from FDCPA for violations, and even if they do, they are insinuating circumstances. A way to circumvent the issue of regulations is to avail of SaaS (software as a service) products like Last Demand that allow you to streamline your A/R with minimal hassle and recover accounts through first-party collection methods.
The methods employed by first-party collections center around customer experience, which is the winning streak that makes this method more successful than third-party collections. If you want your business to grow and achieve your A/R goals, first-party collections experience from Last Demand is the way to go!
