PITFALLS OF USING ATTORNEYS DIRECT
Credit grantors should consider the advantages and disadvantages of using attorneys direct on delinquent accounts. Years ago credit managers participated in a collection survey whereby an overwhelming percentage indicated they preferred using collection agencies as opposed to placing a delinquent account direct with an attorney. Consider the following:
An agency has a continuing flow of business and there is going to be repeat business, which serves as an incentive for an attorney having a relationship with the agency to perform in a competent cost-saving manner. Relative to keeping broad pressure applied, the agency is exposed to a wider variety of debtor schemes and thus can deliver a wider spectrum of counter arguments whereas an attorney is limited to “pay or suit will be filed.”
Local bar association protocol limits lawyers’ actions as collectors. Superior knowledge of the law by attorneys serves as a restrictor upon pre-suit collection activities.
Hourly Compensation – When an attorney is employed on an hourly basis, there is no incentive to settle an account quickly. If an account is settled, hourly commissions cease and; consequently, a quick settlement serves as a detriment to the income of the attorney.
Double commissions are generated if a placement is forwarded to an attorney for collection and it is determined that a debtor’s primary place of business is in a different state. Then, this forces the attorney that initially received the placement to forward the matter to another attorney. Only counsel that is licensed to practice in a specific state can file legal proceedings in the same state where the debtor’s principal place of business is located. Rest assured both attorneys are going to generate billings.
The itemized expenses of attorneys can be another sticking point. Some attorneys claim they handle matters on a contingent basis but then clients end up absorbing office expenses, such as telephone calls and postage. The advantages of using an agency is that in many cases legal proceedings can be initiated on the basis of court costs alone without any hidden costs or expenses. Some attorneys, in their fine print, find ways to increase their commissions if a lawsuit is “contested” or there is a trial, which triggers the assessment of “trial fees.” Technically, every lawsuit is contested unless a default judgment is obtained, which is rare. When you utilize Williams & Williams, you are protected against this type of hidden fee agenda.
Debtors are sophisticated and some have grown accustomed to paying an account at the instant a third party agent becomes involved. Why pay an attorney a large commission when the discounted preliminary fees of Williams & Williams would be applicable.
The law list publishers carry a great deal of influence. In addition, law list publishers police the performance of attorneys within their list. Records are kept concerning complaints whether or not satisfactory resolutions have been obtained. Thus, performance statistics maintained by the list can have an effect when an agency user inquires about past performance.
When there is no assurance of repeat business, which is the case when an agency is bypassed, an attorney can take a lackadaisical approach toward pushing the case along. It could be that counsel does not specialize and, accordingly, the special matter would be shoved to the bottom of the priority stack. The best commercial collection attorneys specialize and they are registered with and bonded by a specified Law List. Our involvement and membership in the Triadic system provides access to the best legal representation possible. When we apply our standards, which means attorneys meet our WWI network criteria, then the “best of the best” is representing our clientele.