Vets: Credit Reporting is Your Top Dog

We are frequently asked, “Why should I outsource collections?” or “What advantages in recovering my consumer’s debt do you have that I don’t?” The easy answer is this: Our advantage as a professional collection agency is we simply have the tools, resources, and industry expertise required to achieve the recovery rates our clients are desiring. For example, one of the most effective tools we have as a collection agency and data furnisher is the ability to report consumer debt to the major credit bureaus.

But why is credit reporting such an effective tool in veterinary debt collections?
Authorizing a collection agency to report your delinquent consumer debt to the major credit bureaus is effective in two ways: For preventing consumer delinquencies, and for resolving consumer delinquencies when they do occur. But before we get into how credit reporting can assist in those two areas, first let’s discuss why having a debt reported to the major credit bureaus is something consumers want desperately to avoid.

When a person fails to pay a bill or a financial obligation and a debt is reported to a credit bureau, the person’s credit score is negatively impacted (decreased). Banks, credit card companies, and other lenders use credit scores for determining an individual’s creditworthiness or potential risk as a borrower. Credit scores are also used to determine if a person will qualify for a loan, at what interest rate, and at what credit limit. So for these reasons, most people (like your veterinary clinic customers) seek to have the highest possible credit score – so as to minimize their risk as a borrower, to maintain easy access to credit for purchases like buying a new car or home, and to minimize the interest rates they pay on loans.

So if you are partnered with a collection agency that has the ability to report debt to the major credit bureaus, don’t be afraid to use this tool for collecting your accounts receivable! On your billing statements, inform consumers that if a bill goes unpaid, it will be sent out for 3rd party collection and that all delinquent debts will, in turn, be reported to the national credit bureaus. Explain the value in maintaining a strong credit score. Make sure you take the time to explain the negative consequences that will come along with a low credit score. Don’t be surprised if this talk-off becomes extremely effective for motivating your slow-paying consumers to pay before you even find the need to submit to a 3^rd party collections agency. Just make sure you have an active agreement with an agency that offers credit reporting as a part of your contract. This is critical because new regulations formally prohibit inferring or threatening treatments which you aren’t actually able to follow through on. (Don’t make empty threats. Instead, calmly explain the consequences of violation of your clearly laid out financial policies.)

As for consumers that are already behind on their accounts, make sure your collection agency informs these consumers that their debt has been reported to the credit bureaus and that this will have a negative effect on his or her credit score. Just the idea of maintaining or repairing one’s credit score is often all the incentive a person needs to pay off an unpaid bill.

But just remember, there are many unique requirements imposed on data furnishers and those companies who report debt. So make sure you partner with a collection agency with strong compliance management processes in place and only uses credit reporting in full accordance with the law.

No Legal Advice Intended: This communication is for informational purposes only and is not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. This communication does not create an attorney-client relationship between you and IC System. You should contact an attorney for advice on specific legal issues.

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