How to Choose the Right Collection Agency: 6 Questions to Ask
Choosing a debt collection agency is a critical decision for any Canadian business dealing with past-due accounts. The agency you hire will act as an extension of your company, interacting with your customers and handling sensitive financial matters on your behalf. The right partner can significantly boost your recovery rates and protect your reputation, while the wrong one could cost you money and goodwill. To ensure you make an informed choice, approach the vetting process with the same diligence you would use for any major business decision. Asking the right questions will help you evaluate a collection agency’s credibility, capabilities, and compatibility with your needs.
Below, we outline 7 essential questions to ask before hiring a collection agency in Canada. These questions cover licensing, ethics, technology, experience, and other key factors that differentiate a top-notch agency from the rest. By posing these questions to prospective agencies (and listening carefully to the answers), you can confidently select a partner that will recover debts professionally, legally, and effectively.
1. Are You Licensed to Collect in the Provinces Where My Debtors Are?
Why to Ask: In Canada, collection agencies must be licensed in each province or territory where they operate – specifically, where the debtor resides. This is non-negotiable. Provincial licensing ensures the agency is accountable to local regulations and oversight, and most provinces also require agencies to post a bond as a financial guarantee. Hiring an unlicensed agency is a big risk: not only could their actions be illegal, but your company could face liability for using an unlicensed collector.
What to Listen For: A reputable agency will readily provide its provincial license numbers or certificates and should be bonded where required. They’ll demonstrate knowledge of each province’s collection laws. For example, if you have debtors in Quebec, the agency should mention that Quebec requires agencies to maintain a physical office in the province to be licensed there. You can verify an agency’s license through provincial consumer protection offices – in fact, a good agency may even guide you on how to look them up in the government’s database for each province. Only consider agencies that are fully licensed and in good standing across all relevant jurisdictions.
2. What Is Your Approach to Ethical Debt Collection?
Why to Ask: Your collection agency’s tactics reflect on your business. You want an agency that treats your customers with respect and follows all legal and ethical standards. Heavy-handed or unethical collection practices can lead to complaints, lawsuits, and reputational damage for you. In Canada, each province has strict rules prohibiting harassment, deception, or unfair practices by collectors. Beyond legal requirements, an agency’s general philosophy matters: Do they prioritize finding amicable solutions and preserving relationships, or are they “hardball” at any cost? An agency that values professionalism and tact will help you recover debts without alienating customers you might want to keep.
What to Listen For: Look for an agency that emphasizes respectful, solution-oriented methods. They might mention a commitment to treating debtors with dignity or a code of conduct like “respect for the individual.” Ask how they handle difficult cases: do they work with debtors to find workable payment plans when possible? Do they avoid aggressive tactics that could harm your brand? The answer should involve words like ethical, professional, compliant, respectful, and diplomatic. It’s a good sign if they are members of professional associations or have accreditations that bind them to ethical standards. An agency’s approach to ethics will directly impact your company’s reputation, so make sure their values align with yours.
3. How Much Experience Do You Have (Especially in Our Industry)?
Why to Ask: Experience matters in debt collection – both overall and within your specific industry. An agency that has been in business for many years has likely weathered various economic cycles and developed robust strategies. Moreover, some agencies specialize in certain sectors (like healthcare, commercial/B2B, consumer retail, etc.). If they “get” your industry, they’ll already understand typical debtor behaviors, common disputes, and effective tactics for that context. For example, collecting from businesses (commercial collections) can be quite different from collecting consumer credit card debt or medical bills. An agency familiar with similar account types to yours will hit the ground running and avoid missteps.
What to Listen For: Ask how long the agency has been operating and what kind of clients they serve. Do they predominantly collect consumer debts, commercial receivables, or both? The best answer is one that highlights breadth of experience and relevant expertise. They might share success stories or references from comparable companies. Be cautious if an agency claims industry doesn’t matter – while core collection skills are transferable, understanding industry nuances can improve results. An experienced agency will also be able to handle unexpected challenges better and train their collectors in effective approaches tailored to different scenarios.
4. What Is Your Fee Structure?
Why to Ask: Cost is an important factor – you need to know how and what you’ll pay for the agency’s services. Most collection agencies operate on a contingency fee basis, meaning they charge a percentage of what they successfully collect (no collection, no commission). Others might offer flat fees per account or hybrid models in certain cases. Fee percentages can vary based on factors like the age of the debt, the amount, and the type of debt. It’s critical to clarify this up front so there are no surprises. However, don’t choose purely based on the lowest fee – a low fee is meaningless if the agency can’t recover your money. Often, agencies with higher success rates charge a bit more, and that can be well worth it.
What to Listen For: A reputable agency will be transparent about their fees and terms. They should explain if they work purely on contingency, and whether that rate varies for different types of accounts. For example, they might say standard commercial claims are 25% but higher for small dollar consumer claims, etc., which is normal. Some might mention a flat fee option for very small debts (like a fixed charge per letter or call), but contingency is more common. Listen for clarity: they should also clarify if there are any extra administrative fees, or fees if an account ends up requiring legal action. The best agencies provide a contract that outlines all fees and will seek your approval before incurring any legal costs. If they dodge the fee question or can’t give a straight answer, that’s a red flag. You want an agency that is upfront and honest about how they get paid. In the end, focus on overall value: a slightly higher commission is worthwhile if the agency has a far superior success rate, whereas a bargain-basement fee is wasted if they recover little.
5. What Is Your Success Rate or Track Record?
Why to Ask: This question gets to the heart of performance. You’re hiring a collection agency to recover money that you couldn’t collect on your own – so how effective are they? While exact success rates can be hard to pin down (and will vary by age of debt and industry), a good agency should be able to give you some metrics or references. Essentially, you want evidence that the agency delivers results and a culture of success.
What to Listen For: Look for concrete figures or at least informative indicators. Even if they can’t divulge all stats publicly, they should confidently discuss their approach to maximize success. The agency should have a proven track record and be willing to discuss it. This reassures you that they have the expertise to turn your unpaid invoices into recovered revenue.
6. How Will You Communicate With Us and Keep Us Informed?
Why to Ask: Maintaining visibility and control over the process is important for you as a client. You shouldn’t feel like accounts disappear into a “black hole” when handed over. Ask about communication and reporting: How often will the agency update you on progress? Whom can you contact for questions, and how responsive are they? A good collection partner will be reachable when you need them. This question also touches on customer service – you want to gauge how the agency treats its clients (not just the debtors).
What to Listen For: Ask if you will have a dedicated account manager or point of contact. The answer should assure you that you’ll never be left in the dark. It’s also worth asking how quickly they act on new placements – an agency that says “we start the collection process within 24-48 hours of receiving an account” demonstrates proactivity. In short, look for an agency that is transparent, accessible, and proactive in communicating with you. That way, you remain informed about what is being done to collect your money, and you can provide input or decisions (such as approving legal action if it comes to that) in a timely manner.
The Bottom Line
By asking these six questions, you’ll paint a comprehensive picture of the collection agency you’re considering. Ensure their values align with yours, gauge their use of modern tools, and confirm they have the experience and success record to back up their promises. Remember that a collection agency will act as an ambassador of your business to some extent – choose one that will represent you well in the eyes of your customers while delivering results. A little due diligence now can save you headaches (and dollars) down the road. With the right questions, you’ll find a collection partner that is licensed, ethical, technologically adept, and highly effective – a partner like that will help you recover debts professionally and efficiently, allowing you to focus on your core business with confidence that your receivables are in good hands.
If your Canadian business is grappling with overdue accounts, consider reaching out to Vanguard. It could be the difference between writing off losses or recovering what you’re owed. With the right partner, you can improve your cash flow, reduce stress, and focus on what you do best – running your business – while they handle the debt recovery professionally in the background.
Learn more about how Vanguard’s debt collection services can be tailored to your industry and needs by visiting our Services page. Curious about the legal side of debt recovery? Check out Vanguard’s comprehensive Legal Services to see how we handle litigation and judgment enforcement across Canada.
Ready to get started? Contact us today.