Using the Law with Collections Efforts for Increased Recovery

Today, it is estimated that income earned by U.S. collections agencies is around $15 billion annually – having tripled in the past 10 years.¹ The sluggish economy coupled with technological advances such as collection specific software and automated dialers have resulted in significant growth and increased competition for the collections industry. However, continued success will depend on its ability to increase productivity through adopting new methods and leveraging resources to stay ahead and get a leg up on the competition.

There are well over 5,000 collections agencies operating in the U.S. today employing more than 130,000 people.² A typical collector working in a collections agency averages about 20 calls per hour reaching six debtors with at least two promises to pay.³ There are law firms and in-house lawyers that are also pursuing collections – all going after the same goal of receiving payment. These promises to pay may or may never be fulfilled by the debtor while hundreds of new past due accounts are added daily to the mounting stack of debt waiting to be handled – day after day, week after week. The collections business is never ending, and the daily management of tracking and finding debtors and getting them to pay can be a long and arduous process.

This ongoing pursuit of collecting debt has prompted an increased desire and need to streamline time-intensive tasks, and to enable collections agencies, law firms and legal departments to improve productivity with existing resources to recover more debt as quickly as possible. If this is one of your business goals, its time to start combining existing processes to create new opportunities to improve recovery efforts in the fastest, most efficient way possible.

One area that is poised for solid growth is the integration of law into the collections environment. Collection Managers and lawyers are quickly realizing the immense opportunities to be gained by using the law to improve the recovery process.

"The goal is the get the debtor to pay," says Leon Moore, managing director for Blatt Hasenmiller, Leibsker & Moore (BHLM), a 130-person Chicago-based law firm specializing in collections. BHLM has been able to achieve solid results in recovering debt since deploying collections litigation software. Moore acknowledges that as the collections industry continues to get competitive, the best weapon is to arm your organization with the right strategy and tools to stay ahead, and stay competitive. "If we don’t stay ahead, we are guaranteed of failure," he says.

Historically, collections agencies have needed to rely on lawyers to manage the legal paperwork and process while law firms have struggled to efficiently manage their processes based on current case level legal status. Law and collections have always worked side by side but never in harmony as there has not been an effective tool to bridge the two components together.

But today’s technologies and software have created new opportunities for both collectors and lawyers to work much more efficiently by bringing collections and litigation process management together – simplifying and automating time consuming tasks to make collections easier and faster. According to a survey by the Commercial Collection Agency Section of the Commercial Law League of America, the probability of collecting an overdue account drops to 73 percent after just three months, to 57 percent after six months and to only 29 percent after one year. So, time is of the essence. The key to effective collections is to start off on the right track by deploying software and tools that provide visibility and accessibility to information and automating processes to enable collections agencies and lawyers to work quickly and efficiently though the maze of processes and keep in compliance with the law.

Collections Litigation Workflow

For BHLM, the collections litigation software it deploys helps the attorneys work concurrently with collectors to manage the judgment process and effectively track the legal status of accounts as they move through litigation, which can be complex and time intensive. The litigation process includes a series of procedures beginning with the pre-suit, a suit process followed by the judgment process and judgment enforcement. Each procedure includes multiple steps that need to be followed in order to determine the next appropriate action to take. For BHLM, the collections litigation software allows them to automate tasks and procedures, enabling them to streamline the entire collections and litigation into one, comprehensive, easy to manage process.

During the pre-suit process, BHLM identifies which accounts to file suit and prioritize those accounts based on whether the debtor has a job. "The software allows us to profile each account using configurable standards to help us determine whether the debtor has a bank account, a home and other assets to identify if the person is able to pay," says Moore. "We go through a series of ‘ifs’ and ‘then’ scenarios that allow the account to flow from one step to the next. These accounts are then put into groups based on criteria, and managed by collectors. The lawyers get involved once these accounts are elevated through the process."

The suit process includes complaint and summons form generation and filing, submission to courts and court appearance dates as well as paying court costs and attorney’s fees, which can all be entered into and managed with the collections litigation software. Moore and his team rely on the software to create and track litigation correspondence, follow legal status of accounts as they move through litigation, and manage trial and hearing dates.

Once the summons is served to the debtor, and a court appearance date is set, the debtor either appears in court and requests to go to trial, or if they do not appear for court, a judgment will be awarded enabling BHLM to move forward with garnishment of the debtor’s wages, seizing personal property or placing a lien on land. If at any point a debtor agrees to pay, a payment plan is then set up. All this is managed and tracked with the collections litigation software.

Being able to effectively combine collections and litigation efforts creates new opportunities to achieve resolution, which is to collect payment, explains Moore. Deploying the collections litigation software has enabled BHLM to benefit from increased cash flow, better time management and utilization of resources. The software streamlines processes and allows BHLM to create reports in which to better manage the business. "We create ad hoc reports as an example to pull information on people who have not been paid in 30 days, which helps us prioritize what accounts to file suit," says Moore. "We can work smarter, be more efficient and competitive and provide increase value and services to our clients."

Whether you’re a collections agency or a law firm specializing in collections, think through your current processes and methods for collections. If your goal is to improve productivity and streamline tasks, and if there are opportunities to expand and diversify your offerings, the time is now to begin considering deploying collections litigation solutions to achieve increased recovery, and stay ahead of competition.

1 The Kaulkin Report, 6th Edition, April 2005
2 The 2002 Economic Census, Business Support Services, Industry Series Report, July 2004
3 ACA International’s 2002 Compensation & Collection Agency Operations Study

Todd Johnson is a client relations executive with over 10 years experience in developing solutions for the collections and litigation market. Johnson is responsible for helping collection agencies and litigation firms improve their recovery efforts through Columbia Ultimate’s software. Columbia Ultimate is the industry expert in providing software and integrated solutions for collecting money. Since 1979, private enterprises and government agencies have relied on Columbia Ultimate’s comprehensive line of software and services to help manage the collection lifecycle. Servicing 30 of the top 100 collections agencies nationwide and the leader in providing revenue recovery to governments, Columbia Ultimate’s software and integrated solutions increase customer’s efficiency, profitability and success.

Headquartered in Vancouver, Wash., with an office in Atlanta, Ga., Columbia Ultimate is a privately-held company with more than 500 customers worldwide. For more information, visit www.columbiaultimate.com.