Collection Agencies: Friend or Foe?

Jul 18, 2014

Are They a Necessary Evil?

Devil-or-AngelThey may not have many fans, but collection agencies are a necessary part of today’s economic world and its smooth workings. Not many of us can find cash at hand each time we need to make a sizeable purchase (whether of land, a house, furniture, business equipment or a required service). For this reason, we often opt to go the route of taking a loan or of taking goods on hire purchase terms. While our intentions to make prompt repayments may have been good at the offset, we sometimes find ourselves in unforeseen circumstances which lead to a difficulty in us honoring our debts.

It is also a fact that some persons intentionally falsify information when purchasing goods and services; default on their payments; and hope to outsmart (and possibly outrun) a company’s collection processes. Companies may then seek to use a Collection Agency to retrieve what is owed to them. Some businesses may choose to actually sell your debt to a Collection Agency (in such cases called a Debt Buyer), but most often the arrangement is one in which the Agency receives a percentage of the debt owed once it has been collected. Some may say they act as a deterrent to persons prone to being bad debtors.

Bad Business Means Higher Prices

We can appreciate that having to go through unplanned means to recover outstanding funds will affect a company’s bottom line. This means that uncollected payments lead to higher costs for the goods or services that the company provides. Businesses need to recoup their money so as to stay afloat and keep employees employed. Even though they may have insurance to protect them against bad debt, we all can understand that in order to keep these premiums at a minimum, they would rather collect what is owed to them, than make an insurance claim. This is a job for…ta-da; a Collection Agency!

How a Collection Agency Works

By definition, a Collection Agency seeks to collect on debts owed either to an individual or to a company by either an individual or by a company. The Agency may be a part of the creditor company or it may be an entirely different entity. When the Agency is a part of the company that provided the credit in the first place, then it is able to “hit the ground running” so to speak. It becomes involved as soon as the account goes into default, attempting to recover the company’s receivables before things get out of hand.

In many instances where no such division exists in the company, the company may make its own attempts to recover funds and only after repeated attempts have failed will it seek out the services of a Collection Agency. The Collection Agency may possess a collection agency merchant account, being able to accept card payments (usually credit card or debit card) on the amounts owed once they have located the debtors.

So … Are They Friend or Foe?

Most people may not have any fond thoughts for Collection Agencies, due mainly to the bad reputation they have acquired over the years. However, there are laws and regulations that govern how Collection Agencies go about the business of making us pay up what we owe. These laws make stipulations in areas such as what means they use to contact us, how often they call, who they ask about our whereabouts and how much information they divulge to these persons. Draconian methods of debt collection, of course, are not within their purview. So while they may be portrayed as annoyingly persistent, they must treat those they seek to collect from with due respect.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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