The Pros, Cons and Outcomes of Hiring a Collections Agency Versus a Lawyer

Written by Mitchell Drimmer on . Posted in COLORADO COMMUNITY ASSOCIATION COLLECTIONS, COMMUNITY ASSOCIATION COLLECTIONS, condo collection agency, CONDO COLLECTIONS, CONDOS, FLORIDA COMMUNITY ASSOCIATION COLLECTIONS., hoa collection agency, HOA COLLECTIONS, HOAS, MARYLAND COMMUNITY ASSOCIATION COLLECTIONS, SNAP COLLECTIONS, VIRGINIA COMMUNITY ASSOCIATION COLLECTIONS, WASHINGTON D.C. COMMUNITY ASSOCIATION COLLECTIONS

pros_consEvery business has their share of those who are unwilling to pay what they owe, and this happens often in Homeowners and Condominium Associations. If you come across unresponsive members, you should be ready to act. One option is to hire a collections agency to do the work for you.

As a collections platform for community associations, SNAP Collections will assist your community in recovering money quickly and efficiently, so the other members don’t have to pay for the shortfall. We have provided the pros, cons and outcomes if you were to choose a collections agency over an attorney to handle this matter .

What Should You do if a Debtor Refuses to Pay?

Unfortunately, sometimes individuals do refuse to pay owed fees, whatever the reason. In order to handle this effectively, we have provided some basic, precautionary steps you can take.

  • Assemble and organize all paperwork related to this individual, especially their ledger with the association.
  • Call the delinquent homeowner to remind him or her of the outstanding debt and the last date of payment. During this conversation, be clear and concise that you expect their payment. Please be cordial.
  • If the previous two suggestions yield no response from the homeowner, you can decide to hire either a lawyer or a collections agency.

Hiring a Lawyer

The option of turning to an outside party for debt collection has its advantages and disadvantages. Here are some things you need to know before considering hiring an attorney:

  • A lawyer has the responsibility of abiding by the debt collection laws in your state as well as Federal Laws (FDCPA).
  • A lawyer will write a letter in appropriate, legal language emphasizing the degree of seriousness if they do not pay what they owe. This letter may produce a payment due to its official appearance.
  • If the delinquent homeowner still refuses to pay, the attorney may file a lien and proceed to foreclose on the unit, property or lot.
  • Regardless of the results, you will still have to pay legal fees, even if the money owed is never recovered.

Hiring a Collections Agency

Similar to an attorney, when hiring a collections agency there are advantages and disadvantages as well. Here are some things you need to know when considering a collections agency:

  • If the delinquent homeowner is ignoring your calls, engaging in a collections agency could be the best option for you. They have resources and techniques to follow up on debt so you don’t have to.
  • The first step will be an initial demand letter giving the debtor 30 days to dispute the debt and advising them that they should call into the customer care center to arrange payment.  Also if the delinquent homeowner decides to evade the reminder letters, or the letters are being sent to an incorrect location a collections agency has the ability of use skip trace techniques to find them.
  • A collections agency may also advise a debtor on how to settle the debt. They are able to make an evaluation of the home owner’s financial situation and try to negotiate a payment plan or even work with them to find sources of revenue to satisfy the debt.  The idea is to be consultative and help the debtor.
  • Some collection agencies also have funding programs where a community association can receive a zero interest advance on maintenance fees that are owed by debtors or bank owned units.  This has proven very helpful to many of SNAP Collection’s clients.
  • Typically collection agencies operate on a performance basis, meaning they there is no cost or risk to the association and that they (the collection agency will only get paid upon a successful collection). They align their interests with the community and this ensures that they do their best for you. If the money isn’t recovered, the community association will not have to pay the collection agency.

Which Option is Right for You?

Both options have advantages and disadvantages. When deciding which solution is best for you and your association, consider the following:

  • A specialized collection agency for community association is focused on maintenance fee collections. This means that they have access to a variety of resources and solutions to handle delinquent homeowners.
  • A lawyer is usually unspecialized in this field and charges high rates for his or her services.  Litigation is the “sport of Kings” and for community associations it does not necessarily lead to a recovery of money but rather a unit that is temporally owned by an association which can bring revenue or in some cases more pain.

SNAP Collections is a collections agency in Florida that has been successfully collecting past due assessments since 2006. Our experience and success speaks for itself, as we are now a national company serving condos and HOAs from the East Coast to Colorado.  Winner of the Florida Community Association Journal’s Readers Choice awards for collections two years in a row.  Contact us today for more information.

readers choice award

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Mitchell Drimmer

Mitch Drimmer and SNAP Collections by Association Financial Services have become synonymous with collections success for community associations. SNAP Collections by AFS has grown to be a national company offering its services nationally. Mitch is a licensed community association manager, real estate broker, and has three collection certifications from various industry organizations. Mitch is on the advisory board of Florida Community Association Professionals (FCAP), a content provider for the FCAP educational program, and frequently writes articles for various publications dealing with issues in community associations.