Business Article

Who’s The Most Important Party in  By Mark V. Matz
Debt Collection? Collection Industry Consultant

The world of debt collection encompasses a number of participants.  Before we examine just who the most important party in handling bad debt, let’s first review who they are and what they provide to keep the flow of capital in the global business economy moving.  

What are the two most are aware of?  They are the debt collection agencies and law firms which specialize in debt collection (or have a designated department or partner which does).  These third-party providers handle two types of debt; consumer (or retail) along with commercial (business to business) collections.  Some agencies and lawyers specialize in one or the other, many handle both.  There are further breakdowns which result in some professional third-party business models having the agency or law firm focusing their efforts on medical, student loan, insurance, credit card or other specific types of debt.  Likewise, some will specialize with their collection efforts aiming towards a specific industry or group of industries.  Most of the larger concerns will do a little of all, while some smaller entities will handle only a single type of claim.  Those which handle consumer work will (or should) be well-versed in all aspects of the FDCPA (Fair Debt Collection Practices Act) which governs how a debt by a third-party can be collected.  Even those working exclusively in commercial are now finding that adherence to the precepts of the act a sound business model.  It should be noted that some attorneys will focus their practice on commercial litigation or bankruptcy and while not strictly collections, these disciplines are part of the debt recovery process.  

As a conduit between agencies and attorneys, there are the publications which produce legal directories, also know as law lists.  While there are a number of larger books which cover many areas of law by providing contact information, experience and backgrounds for lawyers; there are those that specialize in debt collection.  Besides printed volumes, many of these companies have moved into providing names on their websites (while some have produced a CD).  Lawyers pay a fee to be listed in the areas were they can provide coverage.  Those who forward business to attorneys, collection agencies and other law firms, are given the books for free to encourage “forwarders” to patronize those who are advertising in their publications.  This arrangement is a long standing one, as attorneys where prohibited from advertising themselves until the 1970’s and are still restricted in how they can promote their practices by the rules and regulations of the state bar associations.   

Others that are part of the process may include companies that provide insurance against bad debts, factors or factoring companies that will purchase the accounts receivable and outsource management companies that provide the services of a credit and collections department to a company as a vendor.   

Of course, before a debt can be collected; a past due receivable must exist.  The companies that grant credit for providing their goods or services are called credit grantors.  While agencies and lawyers are called third-party, the credit grantor is the first party.  For there to be a debt, an invoice must go unpaid by the credit grantors’ clients who are the second party.  Over the years, the function of credit has rested with the owners, financial officers and sometimes sales staff of companies.  Generally, a Credit Manager is found in those enterprises large enough to have a sufficient portfolio of accounts receivable that needs to be managed properly.  

No matter what your vocation or avocation, there is probably an association or trade group that exists to bind you and your peers together.  These organizations provide opportunities for continuing education and networking.  Some will promote the services of their members as ambassadors to the business community with others working to help drive business to their members.  In debt collection, associations exists for collection agencies (consumer and commercial), collection attorneys (consumer, retail, bankruptcy and more) along with the credit grantors who have their own large national organizations mixed with more localized entities that provide a number of key services.  Even judges have organizations which they can belong to that provide them with a source of education and networking like all the other entities involved within the debt collection process.  

We’ve now explored the route of a bad debt and those responsible for its care and handling along the way to a resolution.  First, a company provides their goods or services to another (person or business) on credit.  If not paid after a contracted period of time, the credit grantor (first party) seeking to collect the debt from their customer/client (second party) can seek the services of a collection agency or collection attorney (third party).  If the debt needs a law suit filed to collect, a law list can facilitate the selection by offering their directory.  Even other attorneys use a list when a suit has to be filed in which they are not admitted to the bar.  If a suit is filed and not resolved, then a court may need to rule on the case and the judiciary is involved in the process.  Even when insurance, factors and outsourced staff are used, the flow to an agency or attorney is often required at some point, unless the debt is simply written off the company books and collection efforts are not pursued.  All through this process, the associations to which each element belongs is providing information and education on how to do their specific segment better and of course, to seek new business as well.  

So, we’ve followed this debt along the path and through the hands of various entities from inception to resolution.  For those involved, have you determined who the most important element is?  While all of these elements become runners in a relay race as they need to work together, there is one that remains the key – the credit grantor!  Without a business granting credit to another, all the others along the way are not required.  So when you look at the industry as a whole, I hope each of those along the way will remember that it is the credit grantor who is truly the most vital team member.

Meet Mark V. Matz

Mark V. Matz - began working in the broadcast media for WGN Radio and Television in Chicago, IL (a part of the Tribune Company) back in the late 1970's as part of the team on the then number one rated radio program. He later worked in the station’s Sports Department working for Baseball Hall of Fame Broadcasters Jack Brickhouse, Harry Caray and Lou Boudreau - before moving into the Finance Department at WGN, reaching the title of Credit Manager in 1986.

Moving beyond broadcasting, he went to work in the credit industry on the association side of the business before branching out to provide marketing services to a number of members of the industry ranging from attorneys, collection agencies and law list publishers. Mark served on staff as Marketing and Membership Director for the CLLA and remains active with the association; including serving as Co-Chair of the National Marketing Committee and on the Midwest Regional Executive Council. He also served on the Creditors’ Rights Executive Council, as Secretary of the Association of Law List Publishers and in various positions on other CLLA and Commercial Collection Agency Association committees. Mark has written numerous articles and spoken at a number of educational programs on marketing, finance, credit and collection issues during his thirty-plus year career.





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