The pre-collection service offered by collection agencies is an intermediary step before full debt collection efforts are initiated. This is a low cost fixed-fee service designed as a less aggressive form of debt collection, providing debtors with a final opportunity to pay their outstanding debts before more stringent collection methods are employed.
This approach is meticulously organized, involving the dispatch of five reminders on your behalf. It typically consists of two phone calls and three written demands.
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Here’s a detailed breakdown of what it involves:
- Soft Reminders: Pre-collection typically starts with sending a series of letters or making phone calls to the debtor as a soft reminder of the outstanding debt. These communications are less aggressive than those used in full-blown collection efforts and aim to nudge the debtor towards making a payment. Client has full control when to stop, pause or restart the service.
- Reduced Fees: Pre-collection services often come with reduced fees compared to full collection services. Since the collection agency is not yet fully involved in the collection process, the cost to the creditor for using pre-collection services is usually lower. Cost varies from $10 to $15 an account, depending how many accounts you buy. There is no other fee and client pays directly to you.
- Preservation of Customer Relationships: One of the key benefits of pre-collection services is their ability to preserve the relationship between the debtor and the creditor. Because the communications are minimally aggressive, there is a better chance that the debtor can be retained as a customer once the debt is settled.
- Payment Plans and Settlements: Pre-collection efforts allows you to negotiate payment plans or settlement amounts that are less than the full debt but acceptable to the creditor. This approach helps in recovering some amount of the debt while providing the debtor a more manageable way to clear their dues.
- Final Warning: Pre-collection serves as a final warning to the debtor that if the debt is not settled, the creditor will escalate the matter to full collection efforts. This escalation might involve more aggressive tactics and potentially impact the debtor’s credit rating.
- Transition to Full Collection: If the pre-collection efforts are unsuccessful in recovering the debt, the collection agency will then move to full collection services. This shift marks a more intensive effort to recover the debt, including the possibility of legal action.
Pre-collection services are a strategic tool for creditors to recover debts in a manner that is less confrontational and more cost-effective, potentially preserving valuable customer relationships in the process.