We all want easy answers to difficult problems but collection agencies may not be the answer you’re looking for.  With the growing number of delinquent accounts some associations may consider using a collection agency.  The belief is that collection agencies will be cheaper than law firms and perhaps, get better results.  Before heading to a collection agency, associations should consider that:

  • Most collection agencies are not set up to handle “revolving” or increasing debts.  They accept accounts for a stated dollar amount and do not add monthly increases, late fees, interest, etc. to the amounts they collect.  If an association wishes to place a debt with an agency it will need to consider how to collect additional assessments, late charges and interest each month that accrue.
  • Most collection agencies don’t handle accounts once a bankruptcy has been filed.  (e.g., they close the account and don’t move for or advise the association as to options or monitor the bankruptcy.)  Once a bankruptcy is filed, most agencies close the file and the association is left with an uncollected debt.
  • Collection agencies don’t generally understand the operations of community associations and don’t understand the legal remedies available to associations by law and under the governing documents. They also don’t have experience in dealing with the impact of public trustee foreclosures, bankruptcies, increased assessments, special assessments, fines and claims of setoff by owners.
  • Most collection agencies don’t have in-house legal counsel, so they can not take advantage of legal action such as garnishments, etc. to collect the debt.
  • If an agency has in-house legal counsel, the association will typically be responsible for paying legal fees as well as the contingency portion of the debt.
  • Collection agencies get paid on a percentage of what they collected.  This can be advantageous to an association but keep in mind that:
  1. They will work only those files that have a high likelihood of being collected.
  2. From the amount collected, which will only be unpaid assessments, late fees and interest as of a date certain, 33-50% will be kept by the agency.
  3. If debt is not easily collectable association will receive no monies.
  • Status reports are not generally provided by collection agencies because of the extremely high volume of cases they handle.

Realizing that one of the main differences between collection agencies and law firms is the amount of out-going or proactive calling that agencies do, Altitude Community Law has collectors on staff who uses the same techniques and tools as many agencies do to increase collection rates for our clients.  Our collectors’ efforts have resulted in millions of dollars collected for our clients.

If you’d like to discuss how our services differ from a collection agency in greater detail please contact any of our attorneys or see our article, “A Risk Sharing Alternative to Collection Agencies” for additional information.

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