Once a collection goes "legal": a short series for creditors.(Reprint)

Many collection or credit managers spend a great deal of time preventing collection problems, whether in the granting process or the in-house collection phase. More experienced personnel understand what happens when an account can't be collected or adjusted in-house and has to be placed with an outside agency. Most managers have had experience with collection agencies and have some sense how that process works. The more experienced managers have systems and relationship set up so their team knows exactly when an account gets placed and how that happens.

Fewer know the ins and outs of what happens after the agency makes its efforts, but can't collect or settle the account. This short series will cover the legal placement and litigation process for a typical collection claim for goods sold and delivered.

Part 1: What Causes It to "Go Legal"?

When an account is placed with a collection agency, the client usually gives the agency authority to place it with a lawyer if the agency believes this move would assist in the collection. As a result, this step often requires the agency to pay the lawyer a percentage of the collection, which reduces the fee the agency wilt earn. The incentive, therefore, exists for the agency to do what it can to collect without legal placement. The better agencies understand that the legal service is part of the "full service package" that agencies provide and realize it goes with the territory. The agency may not make as much money on the legal accounts and, in fact, may lose money. But they understand the idea that the client wants to have its needs serviced and that the agency can be the team leader that ...