Recent press reports suggesting that banks may attempt to collect third party debt in order to collect “bad” bounce-back loans (BBLs) raise a number of important questions.
Collection agencies have always helped banks collect bad loans, credit card debt, mortgages, etc. In this respect, the story is nothing “new”. What may be new is the tone in which the story is being told and that seeking professional help to banks and the government is a sensible step in protecting the public purse in many ways.
Directly or indirectly, the availability of credit affects us all, and we should applaud those who take steps to find the right balance. Banks fear that they will be “overwhelmed” by this task and are understandably concerned about the protection of their reputation. They are also concerned about the increasing blurring of the lines between personal and business debt and the accelerating focus on vulnerability. This is exactly why expert help is required.
> See also: Almost two-thirds of bounce-back loans could go bad, the government says
How to choose a debt collection agency
Bringing this debate to the public raises another important issue, not least for smaller businesses and entrepreneurs: how to collect outstanding debts and, in particular, who to turn to when you have exhausted your efforts?
Many smaller companies are understandably reluctant to take action that could jeopardize a future relationship – especially at such unprecedented times. For this reason, the first step in choosing a debt collection agency is to only work with members of the Credit Services Association (CSA).
Collection agencies that are members of the CSA are already acting on behalf of almost all major financial institutions and the public sector in collecting "consumer debt". The members also manage more than 750,000 business accounts. Together they get back more than £ 400 million each year, including on behalf of many small businesses.
When you appoint a CSA member, you know that not only will they follow the CSA's Code of Conduct, but they will also follow responsible instructions on how to collect debt during this difficult time. You can be assured that your customer will be treated fairly and will show the appropriate leniency where necessary.
Collection agencies take the customer's circumstances into account and are trained to be empathetic and flexible. This allows them to easily adjust to give customers the right breathing space or to negotiate more time to pay or arrange an affordable billing. This also means that they can refer customers to organizations that can give them additional advice if necessary free of charge. When clients tell them they are being advised, make sure they give them the time to do so.
> See also: Claim your debt and track late payments
Why a customer didn't pay
There could be a number of reasons why a customer did not pay. Some customers want to pay but cannot. Some could be for other reasons. A customer may not pay because, for example, they have had to take their employees on leave or are still waiting for a loan to be agreed. In this case, it's about timing. However, it might be that there is no such reason not to pay a debt. In these situations, a CSA member will re-identify the problem and negotiate an appropriate agreement to the satisfaction of their customer.
No profit no fee
The main focus is on getting successful results, securing payments where payments are possible, and providing help and support when that support is clearly needed. Working with a CSA member gives you clarity about the service they offer and transparency about the expected costs. Many operate on a “no win, no fee” basis (assuming no legal action is required) and charge a commission only on the funds collected, leaving you with nothing to lose in many ways. Recommendation is important: talk to other companies that use the debt collection agency's service and learn from their experiences. It is often advisable to work with an agency with particular industry expertise that understands the nuances of your trade and knows what is considered "normal". Often times, you will find that the mere suggestion of third party intervention is enough to pay the outstanding costs.
"Make sure the hard work you've already put into your company is paid for."
The general advice when an invoice is overdue and beyond the term is not to wait. While new income may be harder to come by right now, it's important to make sure the hard work you've already put into your business is getting paid for. CSA members will work with you as an extension of your business to protect your reputation. While it's natural for a company to worry that involving a third party could result in losing a customer, it's also worth noting that a customer who doesn't pay may not be a worthy customer at all is to be kept!
So don't ignore unpaid debts and use a professional to manage the collection process. When you work with a CSA member, you can quickly see that your company is in safe hands.
Chris Leslie is the executive director of the Credit Services Association
Further reading on debt collection
How to chase debt and get paid