Collector - May 2015

time for collection agencies with a consumer-oriented focus to test offering commercial collections because other businesses are expanding at a greater rate.

“More businesses are borrowing money, and that leads to more bad debt,” said Richard Roosen, managing partner at Roosen, Varchetti & Olivier, PLLC in Township, Mich.

Here’s how agencies and attorneys who work in consumer collection—also called retail collection—can get started in the commercial debt arena.

Explore and Expand Your Market

Roosen and Cohen agree it’s wise for a company to first seek to expand existing client relationships and procure commercial collection business with existing consumer collection customers.

While this is a great way to find new business, keep in mind that the nature of commercial collection may also require you to establish completely new client relationships, and potentially expand your business territory to more states or even countries.

Commercial collection clients’ debtors have relatively large unpaid debts—the average size turned over to IACC member agencies is between $3,500 and $4,000, and can even run into the millions.

But commercial
clients may only turn
over 10 to 15 accounts
for collection annually,
compared to the
hundreds or thousands
of smaller debts turned
over by consumer
clients. Generally speaking, this means
commercial collector businesses must
have more clients than consumer
agencies.

Additionally, any given state or region has more businesses that require consumer debt collection than commercial debt collection. This means a small- or even medium-sized consumer debt collection company can afford to limit its geographic territory to a state or region, but a commercial debt collector will likely need to do business in more places in order to find enough customers to be successful.

Polishing a pitch and picking up the telephone can net new customers nearby or in other time zones, although very large clients may request an in-person interview before hiring an agency.

Understand Regulatory and Bonding Requirements—or Hire Someone Who Does

Here’s some good news for those considering commercial collections: Federal and state regulatory environments are significantly more demanding for consumer collections than commercial collections. In any state where a company has achieved regulatory compliance for consumers, it has already exceeded the hurdles for commercial collecting.

But as already noted, a consumer company switching or expanding into commercial collections may need to expand into completely new territory.

Federal law exempts commercial collectors from consumer regulations, but not every state does, and even some cities have unique requirements. Some states or cities only require a business to register, while others have a licensing procedure with its own set of hurdles.

As the U.S. economy grows, so does the need for commercial debt collection—making this a good time for consumer debt collection companies to consider expanding their customer base by adding commercial debt collection services.

Additionally, a holdover in client business practices stemming from the Great Recession means any agency or law firm offering both types of services is significantly more marketable.

During the economic downturn, many large companies decreased the number of staff who worked with vendors, including debt collectors. The economy has improved, but companies haven’t rushed to increase staffing to former levels.

Dual capabilities are what many of the biggest clients that loan money, extend credit or sell goods or services to both consumers and other businesses desire.

“There’s increasing pressure to do both,” said Greg Cohen, vice president of the International Association of Commercial Collectors and CEO of Caine & Weiner in Schaumburg, Ill.