Why Free Debt Collection can cost too much

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free debt collection

We are all familiar with the term No win no fee debt collection or free debt collection but what is the real story here. Seemingly free debt collection services are not always the way to go as it could cost you a lot more than you think.

The UK is in the latter end of a unprecedented pandemic that has forced a recession. When recession happens or cash flow is significantly reduced, companies are naturally looking for a way to spend ‘less’ money.

It is 2020 and history is starting to repeat itself for the UK’s prevalent debt collection industry.

As reported rises in late payment of invoices start to take their toll, Businesses are looking to source a cost effective solution to collect unpaid invoices.

Across the land, some unsuspecting Small Business owners and Company CEO’s will be screaming “get some cheap debt collectors” or “find a no win no fee debt collection agency”.

As with any service or product, cheap is rarely ever cheerful. There are many highly Professional Debt Collection Agencies in the UK but as with any Business sector, there is a tiny minority who are unscrupulous.

Unprofessional and incompetent Debt Collection practitioners are touting so called free debt collection solutions that will potentially do more harm than good. Their mission for pure personal gain, pure and simple.

In the past few months a few ‘Agencies’ have popped up. Presumably hoping to ‘cash in’ on the unpaid invoice vacuum that Covid-19 has caused.

The lure of cheap, free and no win no fee debt collection tags can appear attractive to desperate small business owners. Clever marketing slogans and ‘throw up’ glitzy websites appear to offer valid solutions for some unsuspecting business owners.

The fact of the matter is that using an unscrupulous ‘debt collection agency’ could cost you a lot more than you think.

The great No Win No Fee Debt Collection gamble

The No Win No Fee Debt Collection flag can be a commonly used veneer for opportunists. It seems great. Beware as all that glitters is not gold.

Any Company or service can claim credibility but can they prove it. Reputations are not built in days, weeks or months. They are built over years.

The No Win No Fee slogan was something that was introduced by Law firms many years ago. More specifically, the ambulance chasing solicitor desperate to get work however unethical. They knew that if somebody was involved in an accident that was proven not to be their fault, the no win no fee was bomb proof as they knew their fees would get paid.

Any Professional Debt Collection Agency will be:

  • Professional and competent
  • Accredited and appropriately licensed (FCA Regulated for Consumer Debt)
  • Have a proven track record and years of active trading history
  • Accredited with highly trained staff
  • Have relevant industry expertise to ensure maximum results
  • Have a very transparent fee and charging structure

They may well also be members of the Credit Services Association.

The ‘No Win No Fee’ slogan appears great to any Business owner. ‘No risk’ is the shout they make. WRONG! Of course there’s a risk? There is a risk with any service you use.

Why? Ok let us create a typical scenario that is acted out every week by unsuspecting Business owners looking for a cheap debt collection solution.

Company X is owed £10,000 by a contractor. Company X’s Director thinks he’s being savvy and finds a no win no fee debt collection company.

The Company are very friendly at first and tells Company X “We do No Win No Fee Debt Collection – Its risk free to you with nothing to pay if nothing is collected. You’ve got nothing to lose!”

Sounds great doesn’t it.

What Company X has not factored into their decision making process was:

Will this debt collection agency be:

  • Honest, ethical and transparent
  • Overly aggressive and threatening
  • Have a secure ring fenced account for clients monies
  • Have a disregard for the Business image and reputation
  • have hidden fees or abortive costs
  • Inform of progress and when they have collected any money
  • Solvent, experienced and professional

There are a whole stack of possible ramifications that could arise from the above and liability issues. This is not conjecture, it is fact.

3 months later and Company X has bad reviews about it on the internet, has had a visit from the police and also to top it off, the unlicensed ‘Debt Collector’ has disappeared into the night with their money. Great stuff!

There have been many instances where a debt has been collected then the money never passed on to the instructing party. Rogue Debt Collection firms have made the national tabloids in the past with tales of stealing clients monies.

The fact of the matter is that choosing the wrong solution for debt collection can be much worse than doing nothing at all.

Choosing a Debt Collection Agency to work with

There are many other factors to consider when recruiting a suitable partner for Professional Debt Collection services. That is not to say that all No Win No Fee Agencies are unprofessional, that is not the case at all. There are some very ethical and professional companies in the UK.

The Debt Collection industry is expected to boom post pandemic with record levels of Unpaid Business invoice son the horizon.

The industry has never been more professional so it is a wise choice to work with a reputable and efficient agency. Even the Country’s top Private Schools association has linked up with a leading debt collection agency to recover school fees.

The purpose of this article is not to alarm, quite the opposite. It is designed to educate and provide food for thought. It is more to provide an alert to small business owners seeking a cheap debt collection agency solution.

As stated previously, cheap is not cheerful. Looking for the cheapest or free debt collection service will not get you the results you want. Looking for the best probably will!

For those still adamant that they want a free debt collection service. Good luck as it will likely cost you a lot more than you think. Quite possibly the sum you are owed and your reputation for a start.

Most common myths regarding a No Win No Fee Debt Collection Agency

Using a No Win No Fee Debt Collection Agency is risk free

Wrong – Using a NWNF Debt Collection Agency can risk the amount that you are owed, your reputation plus there may be caveats within the terms of service where you still have to pay fees.

If it is No win no fee, they will put more effort into collecting my money

Wrong – Very often, a No Win No Fee debt collection service is simply a numbers game. No Business can operate without any income, fact!

Using a No Win No Fee service works out cheaper

Wrong – The average commission rates for a No Win No Fee service can often be as high as 50% They often also have charges detailed within their terms for disbursements and additional costs.

A No Win No Fee service will be Professional

Ok common sense applies here. If you want expert Professionals representing your Business and your interests then expect to pay for it.

I was once in a family type eating establishment where it was two meals for a tenner kind of place. I am sure you know the kind of place I mean. I was at the bar purchasing a drink and overheard a customer complaining to a young member of staff. He was complaining that the standard of his steak wasn’t that of the michelin star restaurant that he’d eaten at the previous week.

The young member of staff candidly pointed out that they were not a michelin star restaurant and their steak was much cheaper to which he replied “Well it’s still steak and chips so why doesn’t it taste the same as their steak & chips”

Not the greatest analogy however you will understand the essence of the point being made..

As stated previously, cheap is not usually cheerful. Looking for the cheapest or free debt collection service will not get you the results you want. Looking for the best probably will!

For those still adamant that they want a free debt collection service. Good luck as it will likely cost you a lot more than you think. Quite possibly the sum you are owed and your reputation for a start.

Do you homework and use your common sense before using any type of service supplier is the very best advice.

 

 

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