When businesses consider outsourcing their delinquent accounts, many worry about the perceived risks of hiring a debt collection agency. Yet much of what people believe about collection agencies is based on misconceptions that prevent companies from leveraging collections to protect their cash flow and customer relationships.
Outsourcing your delinquent accounts to a professional debt collection agency can bring huge advantages, not just for improving your recovery rates, but also for protecting your brand and freeing up internal resources. With over 70 million Americans having accounts referred to collection, debt collection isn’t a fringe issue, but a central part of the credit ecosystem.
Here are six of the most common misconceptions we often see from businesses, and why they are misleading.
Contents
- 1 1. Using a Collection Agency Damages Customer Relationships
- 2 2. Collection Agencies Demand Full Payment Immediately
- 3 3. Once the Debt Is Outsourced, You Lose All Control
- 4 4. Collectors Rely Solely on Threats and Intimidation
- 5 5. Outsourcing Debt Collection Is Only for Very Old or ‘Dead’ Debts
- 6 6. Collection Agencies Only Care About Profit, Not People
- 7 Customize Your Collection Strategy with FCS
1. Using a Collection Agency Damages Customer Relationships
Misconception: Sending customers to collections means burning bridges.
Reality: Professional debt collection services preserve customer relationships instead of damaging them. They know that collection is about resolution and not intimidation. Representatives are trained to communicate respectfully, negotiate realistically, and treat customers as individuals. Over time, a well-handled collection process can even restore trust, because it signals that you care about resolving issues rather than simply writing off debt.
2. Collection Agencies Demand Full Payment Immediately
Misconception: Collection agencies force lump-sum payments and charge high fees
Reality: Many agencies operate on contingency and they only charge when they successfully recover something, so their incentives align with yours. They also understand that customers may not pay in full at once. They commonly offer structured payment plans or other flexible arrangements. This makes the cost far more manageable than writing off unpaid debts.
3. Once the Debt Is Outsourced, You Lose All Control
Misconception: When you hand off delinquent accounts, you no longer have control over what happens, and you cannot intervene.
Reality: Good agencies work with a collaborative mindset. As a client, you can easily track collection strategies, receive detailed reports, and stay informed at every step of the process. On the consumer side, debtors retain rights; they can dispute or validate the debt, ask for documentation from the original creditor, and negotiate for flexible payment options.
4. Collectors Rely Solely on Threats and Intimidation
Misconception: Debt collectors threaten, lie, and harass customers to force payment.
Reality: Compliant and ethical debt collection agencies operate within legal frameworks like the Fair Debt Collection Practices Act (FDCPA). These laws prohibit harassment, false threats, impersonation of law enforcement, and other abusive practices. To recover payments, agencies focus on compliance, respectful communication, and fair negotiation. Their aim is to reach a resolution, not to intimidate your customers.
5. Outsourcing Debt Collection Is Only for Very Old or ‘Dead’ Debts
Misconception: You only send old, written-off debt to a collection agency and newer delinquencies are handled in-house.
Reality: While some accounts enter collections after a long time, many agencies work on relatively recent delinquent accounts. According to industry statistics, the average age of accounts before referred to collections is around 180 days (about six months). In fact, the earlier you engage a reliable partner, the higher the chances of recovery. Also, debt sent to collection is not always inactive as many accounts remain viable, and your debt collection agency can handle both early-stage and aged debt strategically.
6. Collection Agencies Only Care About Profit, Not People
Misconception: Agencies are purely profit-driven and they do not care about the debtor’s circumstances
Reality: Many agencies emphasize a consumer-centric approach to recovery. They know that harsh tactics can backfire and aggressive attempts often shut down communication. Many agencies offer flexible payment plans, personalized settlement offers, and self-service payment options so customers can pay their debt on their own terms.
Customize Your Collection Strategy with FCS
Misconceptions about debt collection agencies are common, even among businesses that benefit the most from partnering with one. With the U.S. collection industry worth nearly $30 billion and over 6,400 agencies in operation, choosing the right partner becomes crucial. When partnered with a BPO service, collections protect your cash flow, even improve customer relationships, and recover value without damaging your brand.
For over 30 years, First Credit Services has been supporting Fortune 500 companies in recovering all types of consumer and commercial debt, including medical, membership fees, auto loans, and credit cards.
Consult First Credit Services for customized collection strategies, driving recovery, and ultimately boosting your bottom line.
