Fair Go highlights importance of carefully choosing your Debt Collector
A recent episode of Fairgo highlighted the need to ensure that you select the right Debt Collection Agency, so you not only get the right result, but you also actually get your cash.
The story centered around two consumers who had engaged Gilbert Chapman to recover debts for them. In the first case Gilbert had achieved a recovery of $30,000 (all good you would think) but wanted to charge commission on $70,000 (being the original debt) at his commission rate of 20%. On top of that he had held the money for over 10 months, and not paid out anything.
In the second story the dissatisfied consumer had cancelled the contract after five months with Gilbert, as nothing had been recovered, and was now being taken to the Disputes Tribunal by Gilbert for a cancellation fee of $15,000. Unfairly, in both cases Gilbert's contract did allow him to charge the exorbitant cancellation fee / commission.
So what should you do to avoid being in the same position (besides not using Gilbert Chapman)? There are four things at Debtworks we suggest that you should consider when you select a Debt Collection Agency.
1 - Do they have a trust account? A trust account means that any money recovered by your agency is placed in a separate audited account, and can’t be used to pay their own bills.
2- Do they have online access? You should be able to go online and view your debts to see what is going on, what activity there is, and what amount has been recovered so far.
3 - Read the fine print! What are the terms and conditions? Ask the questions, what happens if I cancel the debt, or if I settle for a lower amount? A good agency will cover all the variations in its terms, so you should get no surprises.
4- Do you trust them? When you appoint a debt collection agent, you are appointing a fiduciary agent, someone who prudently takes care of money for another person and should act in your best interest at all times. Do you trust that agency to undertake that role and pay you? Normally for fiduciary agents (like lawyers or accountants) you would get a recommendation from a friend or colleague, and when it comes to a debt collector it is the same. Ask them for references, who else do they also act for? If for example they act for major corporates then they will have already passed some very rigorous tests.
If you want to see the episode go to http://tvnz.co.nz/fair-go/disappearing-debt-video-5445242.