| Did you know that 70% of Citibank's bad debt | | | | exclusive skip trace firm to increase their |
| accounts are skipped accounts? And that 10% | | | | recovery on bad debts. Many collection agencies |
| are bankruptcies and deceased accounts? That | | | | offer "skip tracing" as an added service to their |
| leaves just 20% of their bad debt that they are | | | | clients. In most cases, based on the limited tools |
| "actively" trying to collect or that they normally | | | | they have available to them, they do not locate |
| just write off or sell. What happens to the other | | | | 80% of the accounts they are looking for and |
| 80%? | | | | therefore send them back to the creditor as |
| Of the $60 billion of debt that will be charged-off | | | | "uncollectible". Business owners need to be aware |
| by issuers of general-purpose credit cards in the | | | | that when that happens, all hope is not lost. They |
| United States this year only 90% is potentially | | | | should place that 80% of bad debt accounts with |
| collectable because 10% is tied to deceased, | | | | a professional skip tracing company and send |
| fraudulent and bankrupt accounts. When this 90% | | | | them back to the agency for collection once they |
| of debt is placed with collection agencies it is | | | | have good contact information for the debtors. |
| found that half of the cardholders cannot be | | | | Depending on the balance that is due, this can add |
| located even after the use of databases and | | | | up to quite a bit of money at the end of the |
| online tracing tools. | | | | year. It has been my experience that collection |
| Government regulations prohibit collection agencies | | | | agencies that also offer "skip tracing services" |
| from using any means other than databases to | | | | locate approximately 15% of the accounts they |
| find debtors because they are not the owners of | | | | work if they are doing collection work and limited |
| the debt. So if these accounts are placed with the | | | | location work. This is because most agencies train |
| agency on a contingency or other basis they | | | | collectors to collect not skip trace, and also since |
| would need to ask their client who placed those | | | | they work for the agency they are bound by the |
| account with them to hire a "skip tracer", "private | | | | same laws as the collector and therefore are |
| investigator" or "skip tracing firm" to locate those | | | | limited in the use of certain location tools. Many |
| debtors for them so they can then continue to | | | | people I interviewed for this article share the view |
| try and collect. If you purchase credit card debt | | | | that when you work at a collection agency there |
| and are the owner of the debt you can utilize the | | | | is little time for skip tracing in most agencies, the |
| tools a professional skip trace firm uses to locate | | | | biggest reason being that most agencies work on |
| those debtors and continue to try and collect. I | | | | a commission basis, where they get paid for the |
| am told by professional skip tracers that you | | | | money collected. If they are successful in locating |
| should check with the state you reside in. There | | | | a debtor, they still have to try and collect and |
| are a number of states that do not require | | | | that is not a guarantee. The general consensus is |
| licensing or that do not have state regulations. It is | | | | that it is not cost effective for collectors or |
| all over the board and varies from state to state. | | | | collection agencies to spend time and money skip |
| 45% of all charged-off accounts are returned to | | | | tracing when they could be spending their time |
| issuers after primary, secondary and tertiary | | | | collecting, which is what they do best. |
| collection efforts by collection agencies without | | | | I interviewed many collection agencies that |
| any collection activity because the debtors could | | | | advertise "skip tracing" as one of the services |
| not be found by traditional data base or collection | | | | they offer and many of them stated that the |
| skip trace methods. Issuers then have two | | | | way they "locate" debtors is through credit |
| choices, sell the debt or hire a professional | | | | reports, asking other business owners in their |
| investigator to track down the debtors. The | | | | network about the debtor, and search engines. |
| overwhelming practice has been to sell the debt. | | | | Some of them told me that they offer address |
| Card issuers seldom hire professional tracers | | | | location, phone number reversal and retrieval, |
| because they consider them too expensive and | | | | employment location, banking locations, vehicle |
| feel they are throwing good money after bad. | | | | locations and much more but couldn't elaborate on |
| This could be because they can't be bothered to | | | | how they obtain this information. I even had one |
| continue to spend time on the accounts or that | | | | company that offers skip tracing tell me that |
| they don't realize that most location firms offer a | | | | they could not comment on answering any |
| quote on all portfolios prior to processing and in | | | | questions about their skip tracing techniques based |
| some cases the cost can be added to the debt. | | | | on "their direction and target audience." When you |
| Fees range from $100 - $150 for small balance | | | | are researching a location or skip tracing firm be |
| accounts with average fees of $350 to $450 for | | | | sure to check references, check their credentials, |
| most portfolios. These tracers usually uncover | | | | and talk to their customers. Some have websites |
| home and office addresses and phone numbers | | | | with testimonials listed. Email those people, ask |
| which then let the collectors make contact and | | | | them how the service worked for them; be |
| try to collect their money. Most importantly, | | | | smart about your money. |
| because so much time has elapsed since the | | | | Business owners who utilize the services of |
| original charge-off date, collectors can go after | | | | collection agencies recognize that they need help |
| not only the original debt but also accumulated | | | | with those collections and so they place or |
| interest, fees and in some states the cost of the | | | | outsource their bad debt to their collection agency. |
| tracing or locating of the debtor. The original | | | | Once their agency returns any accounts they |
| amount of debt charged-off doubles every 30 | | | | cannot collect due to being unable to locate a |
| months with added interest and fees. | | | | debtor, a smart business owner should then |
| Some professional investigators or skip tracing | | | | recognize that they can place those accounts with |
| firms can locate up to between 70% and 80% of | | | | a professional skip tracing firm to have them |
| missing persons, I know of one location company | | | | located and then give them back to their collection |
| that guarantees that they will locate 80%, so | | | | agency to collect on. This way they are helping |
| how can you lose? Other firms that specialize in | | | | themselves and their collection agency and |
| location work state that the information | | | | recovering more of the money they are entitled |
| uncovered can be virtually limitless depending on | | | | to. Creditors who utilize a location or skip tracing |
| how much money the client wants to spend and | | | | service are smart and will see that reflected in |
| the permissible purposes they are operating under. | | | | their bottom line. |
| Some examples they gave are assets, physical | | | | Collection agencies will sometimes outsource |
| and mailing address, vehicles, telephone and cell | | | | different aspects of their collection work, such as |
| phone numbers. Location firms are not subject to | | | | generation and mailing of letters. Collection |
| the government regulations that prevent the use | | | | agencies do this because they recognize that they |
| of aggressive tracing techniques by any entity | | | | can collect more money if they outsource |
| other than the owner of the debt. All private | | | | something they don't specialize in, such as printing |
| investigators are regulated by their state in which | | | | letters, stuffing envelopes and mailings and focus |
| they operate. Their rule of thumb is, don't do | | | | on what they do best, making collection calls and |
| anything to locate a person that you wouldn't do | | | | collecting money for their clients. When they |
| to locate your mother or your best friend. Private | | | | return accounts to their client, and ask them to |
| investigators have a fair amount of latitude as | | | | provide them with current contact information so |
| long as they don't do anything illegal, immoral or | | | | they can continue to try and collect, they are |
| unethical. As a PI it is illegal to pass yourself off as | | | | making a smart business decision. They will make |
| a police officer, official of the court or any other | | | | more money because once the client receives the |
| government official. If the company you hire to | | | | accounts back from their skip tracing firm, the |
| do your location work has no involvement in the | | | | agency can then work the account, collect the |
| debt collection aspect after the individual is located | | | | money and make a commission as well as send a |
| and has no knowledge of the specifics of the | | | | check to their client. Everyone is happy. |
| debt, they are not a "debt collector" as defined | | | | Location firms, businesses and collection agencies |
| by the FDCPA. This is an important distinction. The | | | | complement each other by working together to |
| skip tracing firm must not be owned or affiliated | | | | ensure as much debt as possible is collected, |
| with a collection agency. Chris Soteros the skip | | | | resulting in all parties being successful. After you |
| tracing manager at Merlin Information Services | | | | look at these facts, take a good look at your |
| states that they must abide by the FCRA and | | | | business and bad debt and ask yourself, "Can I |
| the Gramm, Leach Bliley Act both of which | | | | afford not to use all the resources that are |
| restrict their use of Credit Bureau information to | | | | available to me to recover the money that I am |
| activities supporting the collecting of a debt. He | | | | owed?" If you are in business to make money, |
| also stated that his company is not a third-party | | | | using a location firm, just like using a collection |
| debt collector and therefore is not regulated by | | | | agency is a necessity. |
| the FDCPA. | | | | The market for debt buyers and collection |
| Third party debt collectors must follow the | | | | agencies has become increasingly competitive with |
| FDCPA when obtaining location information, this | | | | higher prices, greater risks and more exacting |
| includes in house "locators or skip tracers", even if | | | | demands on performance according to the |
| they are not doing any collection work. This | | | | November issue of Cards & Payments. In |
| means that they can use databases and phone | | | | view of this you want to work together with |
| calls as long as they follow the FDCPA. | | | | your collectors and your skip tracers. When you |
| Most collection agencies and business owners are | | | | can help make a collector's job easier by utilizing a |
| not aware that they can partner up with an | | | | skip tracing company, you will all benefit. |