Collaboration with law firms and Debt Collection Agencies (DCAs) is an integral part of modern collections and recoveries practices. Not only at the stage of the legal action where the involvement of legal professionals is necessary, but also at the earlier, amicable collections stages.
Involving law firms across the debt management lifecycle
Law firms or DCAs are not only involved in the final stage of the debt collections. According to the portfolio owner’s objectives (collections only, or collections and restructuring, etc.), they can also be engaged at earlier debt collections stages.
At the pre-legal stage, cases and portfolios are typically assigned to law firms or DCAs both because of additional capacity to assist the portfolio owner’s own resources, but also because a call from a law firm carries additional importance.
The message to a debtor is clear: The creditor is seeking an amicable solution, but in case an agreement is not reached, legal means will be used.
At the legal stage, court proceedings begin. However, even in this phase, law firms will make efforts for “last chance” amicable solutions. If this is not achieved, the case will continue to the execution stage.
Managing complexity and operating risk
Legal actions are an indispensable part of any recoveries operation and assignment to law firms for collections has significant advantages. But case assignment and partnership with law firms also raise new challenges. Collaboration with law firms adds complexity to managing debt portfolios, incurs additional operating risks, and requires thorough control and streamlined operations.
The main challenges are:
Efficiently exchanging data. Even though the technology is providing modern methods for data exchange, in many cases portfolio owners and law offices continue to rely on spreadsheets containing vast amounts of information, being transferred back and forth. This approach has several serious issues as it requires dedicated staff to consolidate these files and check them for potential errors (without eliminating this risk). This time-consuming process of exchanging data often results in a lack of homogenous data since different law firms tend to use different templates.
Cases remain stalled for long periods. Law firms are assigned a significant number of portfolios and cases, which can challenge their capacity. In combination with the slow speed of the court system in some countries, cases assigned to law firms could remain stalled for long periods.
Undertrained call center agents. When law firms contact customers to seek solutions, they use call center agents. However, call center staff often lack experience or even adequate training. This can lead to poor results or even complaints, incurring operating risk.
Risk of misrepresentation. A common misunderstanding among customers is the assumption that the person calling them from a law firm is a lawyer, while most often they are call center agents.
Communication with customers by several different law firms. Portfolio owners often decide to recall and re-assign cases to another law firm or DCA. The new law firm or DCA taking up a case, will call again the customer for debt collection or propose a payment plan or restructuring, even if the same customer has been contacted in the recent past. In the absence of a clear history of past communications, the customer can repeat over and over the same communication, winding up in a vicious circle. Some debtors realise this and use it to their advantage, to avoid agreeing on a sustainable solution.
Use of non-digitalised documents. Many law firms (partly due to the traditional operating model of the court system) rely too much on printed documents that are never digitalised. This brings all the corresponding risks of misplacement, destruction, and lack of speed in retrieving these documents.
How to promote productivity and efficiency
To respond to the challenges listed above, minimise risks, and most importantly make the most of the collaboration with law firms, portfolio owners need to have a clear vision of the scope and objectives of collaboration as well as the organisation and technological tools to manage it effectively.
Before assigning to a law firm, portfolio owners should:
Ensure that their collections system supports real-time updates by the law firm and streamlined reporting according to their specs.
Provide effective guidance on communication scripts to be used by law firm agents to ensure the approach and tone of communication are consistent with their organisation’s approach and goals.
Have the law firm commit to using the collections system. Make sure that all the fields will be completed and the activity types that can be selected are well understood by the law firm supervisors so that they can correctly lead their staff.
Validate that the files of the cases assigned are as complete as possible. Law firms get all documents necessary to file a legal case and all the relevant historical data of case management up to this point.
Be clear to the law firm about the strategy per segment, and the primary and secondary objectives expected from the management of the portfolio or the case assigned.
Ask about the firm’s current technology infrastructure and assess its technology readiness.
During the assignment, portfolio owners must:
Monitor collections and legal actions in real-time
Evaluate results and take corrective actions
Respond promptly to comments inserted on the system and requests for guidance
Push for greater digitalisation and elimination of unnecessary paperwork
How QUALCO Can Help
With a rapidly growing user community across Europe, QUALCO Collections & Recoveries (QCR), the end-to-end platform designed to streamline C&R operations, provides a Legal Management module that enables portfolio owners to tackle any complex legal challenges with efficiency and compliance. From managing the setup of all their legal processes and streamlining these processes through advanced case assignment and task optimisation the Legal Management module set portfolio owners in a pole position to:
Have full control in the management of legal processes
Manage cases at a granular level
Increase accountability of all the parties involved
Automate routine processes
Have access to consolidated performance metrics for all law firms they collaborate with