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Collection Agency FAQS

A FAQ:    What You Need To Know About Commercial Collection Agencies Located in the Dallas / Ft. Worth Metroplex

Question:    Who are you?

Answer:    My name is Jason Lee Van Dyke, a Texas attorney, and I am the owner of The Van Dyke Law Firm P.L.L.C.  Prior to entering private practice, I started my career collecting through litigation for a factoring company.  I then became in house counsel for a collection agency and spent over 18 months learning about how the collections industry works in Dallas / Ft. Worth before I started my firm and entered private practice in May of 2011.

Question:            What did you learn about commercial collection agencies?

Answer:            That is what this FAQ is all about.  I am a collections industry insider who worked for an agency as its general counsel.  I know all of the secrets, dirty tricks, and scams used by commercial collection agencies to create business, obtain wealth for their owners, and defraud their customers. 

Question:            Is there a difference in commercial collection agencies in the Dallas/Fort Worth Metroplex?

Answer:            There are a few very select agencies that are different from the others, but the rest operate in essentially the same manner.  Dallas has a relatively large concentration of collection agencies and has traditionally been home to some of the largest.  It also has a collection agency problem, which started 7 – 8 years ago with several high level employees of an agency called Nationwide Recovery Systems Ltd.  (NRS).  The story of what occurred is a long one and I will not mention any specific names.  To make a long story short, the agency was bought out and these employees – who were making extraordinary amounts of money in sales – were fired. Although all of the fired employees had had non-competition agreements, they went out and formed a number of other large industries to compete with NRS which included (but are not limited to) Burt & Associates and Haller, Harlan & Taylor.  As time went on, salespersons and collectors working for these agencies started doing the same thing, forming agencies such as Pre-Litigation Bureau, DFA, Stillwell & Stone, Scott Cole & Associates, JB Mickel & Associates, and many others.  Many of these companies are no longer in business, and this is explained later in this FAQ.

Question:            How does a commercial collection agency work?

Answer:            It’s really a very simple business model.  Most employees work on the sales floor in a boiler room style environment and make cold calls to companies from an automated dialer populated with sales leads.  They spend the rest of their time calling their existing clients back to obtain more business.  Once an account is placed for collection it gets sent over to the collection department, which attempts to collect the debt.  If they are unsuccessful, the case gets sent to the “legal” department, which generally consists of one employee (not an attorney) from the collections department whose sole job is to place accounts with attorneys for litigation and get status updates from attorneys on accounts already placed with attorneys.  In other words, these collection agencies are little more than a dangerous and expensive process for placing a bad debt with an attorney. 

Question:          How does their sales floor work?  How do I know if one of these companies is trying to call me?

Answer:            Luckily, since most of these agencies are offshoots from NRS or from each other, the sales pitches are almost exactly the same.  Here are some key pitches and phrases to listen for, and why they are typically a load of malarkey:

  1. “I can get your money collected in five days or less” or “I specialize in five day debt recovery”.   This might be true if your debtor is a complete idiot or if you have not made any in-house efforts to collect the debt.  The fact of the matter is that you are unlikely to see your money in five days.  Most clients will never see it at all.


  1. “We don’t get paid unless you get paid” or “I only get paid if I am successful”.  This is not only untrue, but it is outrageously deceptive almost to the point of being legally actionable.  Collection agency clients are all required to sign written agreements with the agency.  These are typically worded so that the client “assigns title” to the collection agency for the debt.  They also contain language stating that the agency’s fee still applies in full if the debt is paid prior, not owed, interfered with, ordered dropped, or withdrawn during the collections process.  This “collections process” is never limited to the five days advertised.
  2. “Just so I can quote you my rate, how much does your worst customer owe you?”   Don’t try giving them a hypothetical debt here.  If you do, they will give you their “hypothetical rate” and verbally assault you for trying to waste their time.  This question is used to get the mark to admit that they have a customer that owes them money.  When the mark says that he has no “problems”, the salesperson responds by saying I am glad to hear that because problems are clients with disconnected phone number or who have filed for bankruptcy”.


“Why wouldn’t you place this account for collection today?”  Unless your response is an affirmative that you will place the account with their company, the salesman will usually berate you.  Some salesmen sound as though they are becoming belligerent.  They are not.  It is all part of a script that the salesman is required to read from.  Deviating from the script – even slightly or for reasons dictated by common sense - is grounds for termination of employment.  This is why many salespersons employed by collection agencies won’t respond intelligently to anything you tell them.  They are trained to simply continue giving their pitch. 


Question:            What is so bad about the agreements these collection agencies ask me to sign?

Answer:            First and foremost, they do not contain the terms advertised over the telephone and the terms they do contain are almost always unconscionable.  I know this because I have personally drafted a number of these agreements.  They are typically exchanged by email or fax and designed to look like a very simple “boilerplate” contract.  Sales associates are trained to represent them as being “no big deal” or a “mere formality” over the phone, and the salesman usually demands that the agreement be signed immediately.  They don’t tell you that, if you are dissatisfied and fire them, that the contract entitles them to 100% of the fee they would have earned if they had collected the entire amount owed by your debtor.  In other words, once hired to collect a debt, these collection agencies cannot typically be fired for any reason.

                        This isn’t even the half of it.  The agreements typically contain provisions in which clients assign title to their accounts receivable to the agency.  They all contain forum selection clauses designed to give the collection agency a significant advantage in litigation proceedings.  They also don’t state the manner in which an account is to be placed with the agency.  As a general rule, all that is required to assign title of your receivable to the agency is identifying the debtor and an amount owed over the telephone.  And don’t be fooled: if you are talking to a salesperson, the telephone call is ALWAYS being recorded. 

Question:            How do agencies with such unethical business practices keep getting clients to place accounts with them?

Answer:            Clients are generally divided into “VIP” and “regular” categories.  The VIP clients are those who place a great deal of quality business.  They are typically paid on schedule so that they are kept happy.  Since the agency makes plenty of money, the VIP clients don’t know what happens to the other clients.  They don’t even know they are a VIP client!  For the regular client, agencies have adopted a “sales tactic” of not paying their customers on existing accounts until new ones are placed for collection.  This is called “slow-paying” .The agency may (or may not) pay its customer eventually – but placing more business is a pre-requisite to timely payment.  Most customers simply oblige.

Question:            Is their collections process just as bad?

Answer:            The collectors will call your debtor and claim to be from the collection agency’s “legal department”.  They will say that the client has already given authorization for them to file either a lawsuit or a Form 1099 with the IRS.  If that doesn’t work, they will tell the debtor that they are sending a private investigator to do an asset and liability investigation of their business.  A few hours later, another collector will typically call the debtor from a different number claiming to be a private investigator on his way to their main office.  These are just a few of the tactics used, and believe it or not, they are quite effective.  If the debtor hires an attorney or repeatedly hangs up on a collector, the case will either be dropped or sent to an attorney in the debtor’s home state.  The attorneys who get these cases are typically broke themselves because the collection agencies normally pay only 20 – 25% contingency if any funds are recovered.  Funds are only collected in about 20% of collections lawsuits, which means most of these attorneys take such work for lack of anything better to do with their time.

Question:            But my collection agency is a member of the Commercial Law League and the Better Business Bureau. 

Answer:            I heard this in a trial involving collection agencies once.  It was used by opposing counsel to fool a jury.  The truth is that membership in such organizations is meaningless.  Almost anyone can join these groups and none of them have the authority to take legal actions against their members.  The worst thing one of these organizations can do to a member is revoke its membership – at least until they reopen under a different name. 

Question:             Aren’t collection agencies subject to strict regulations?

Answer:            No.  In fact, they are almost completely unregulated.  Consumer collection agencies (those collecting credit card debts and the like) are required to post a $10,000.00 bond with the Texas Secretary of State.  Agencies collecting only commercial debts are not even required to do that.  There are no legal restrictions on who can own or work for a collection agency and there are no licensing requirements for collectors or owners.  A typical collection agency employee (or owner) has a high school education or less and many agencies employ convicted felons and persons with drug or alcohol problems.

Question:            What about the Fair Debt Collection Practices Act or FDCPA?

Answer:            The FDCPA is designed to protect consumer debtors from abusive practices by collection agencies.  It does not protect individuals who owe commercial (or business) debts.  It offers no protection to the clients of the collection agencies themselves.

Question:            How does a collection agency get away with not paying its clients?

Answer:            Most of these agencies are corporations or limited liability companies.  When enough of their clients start suing them for the unpaid money, they simply go out of business and reopen in a new location under a different corporate shell.  They “sell” all the assets of the old company to the new one and make minor changes to the corporate structure of the new entity.  Since a client’s contract is with the agency and not the agency’s owner, the client has little or no means of recovery because the business (and all of its assets) are gone by the time they get their day in court. 

This is a very common occurrence in the DFW area.  One example us Jackie Dean Scott.  Scott, a convicted felon, used an agency called SCA & Associates (or Scott Cole and Associates) to defraud clients of hundreds of thousands of dollars. Before being arrested on unrelated felony charges, he reopened as Lords & Wakeman (LAW) when a receiver was appointed to seize SCA.  This scam was nothing, however, compared to Stillwell & Stone.  Stillwell & Stone made off with an estimate $1,000,000 or more in client money.  Now that agency is no longer operating - because instead of paying their clients the owners of Stillwell & Stone simply started a new agency called JB Mikel & Associates.  A simple Google search reveals that the complaints are already starting to pile up against the new company. 

Question:            What is the solution to this problem?

Answer:            It’s very simple.  Stop hiring collection agencies and start hiring attorneys. 

Question:            Don’t attorneys cost more than collection agencies?

Answer:            Absolutely not.  Of course a collection agency wants to make you think that going to an attorney will cost more.  This is part of their sales pitch.  Attorneys are prohibited from advertising the way collection agencies do.  If it became common knowledge that there were plenty of attorneys willing to do the same work as collection agencies for substantially the same rates, all of the collection agencies would find themselves out of business.  Why?

Question:            How are an attorney’s rates different?

Answer:            Typically, they are no different.  Collection agency rates are based upon a percentage of the amount collected.  These are called “contingency fees” by legal professionals.  Most attorneys will accept a debt collection matter on a contingency fee.  For both attorneys and collection agencies, the amount charged is typically between 20 – 50%.  This, of course, depends upon the debt itself and the specific facts of a case.  Some attorneys take cases for a flat fee or an hourly rate.  Don’t be fooled; this is actually a better deal for clients in many cases.

Question:            How are attorneys more regulated than collection agencies?

Answer:            All Texas attorneys must be licensed by The Supreme Court of Texas to practice law.  Obtaining a license typically requires seven or more years of higher education to obtain a doctorate (Juris Doctor or Doctor of Jurisprudence) degree.  Texas requires prospective lawyers to pass a rigorous moral character and mental fitness background check, and earn a passing grade on the Texas bar exam.  Criminal misconduct subsequent to licensure often results in an attorney being “disbarred” or having their license to practice law revoked.  In other words, convicted felons, drug addicts, and those with severe mentally illness are generally prohibited from becoming or remaining attorneys.  All Texas attorneys are required to be members of the State Bar of Texas and complete at least fifteen hours of approved continuing legal education (CLE) classes every year.  Three of those hours must be devoted to legal ethics.

Question:            My collection agency said that it would get me an attorney for a $1,500.00 fee?

Answer:            Google will do the same thing for free.  Save your $1,500.00 and use it to pay an attorney who is trained to collect commercial debts.  The attorney referral fees charged by collection agencies go straight into their operating account.  Even if they do find a decent attorney for you, the lawyer never sees a dime of that money. 

Question:            You mentioned that a collection agency cannot typically be fired.  Can I fire my attorney if he accepts my case for a contingent rate and I am dissatisfied with his work?

Answer:            Yes!  You always have the right to fire an attorney.  If he did work for you on a contingent fee, you may have to pay the fair market value of the work already performed.  However, you will almost never be required to pay the full amount he would have earned had he been successful in collecting the entire debt you placed with his office. 

Question:            How does working with an attorney offer me more protection?

Answer:            Aside from the regulation of attorneys, a big reason is client trust accounts.  Attorneys are obligated to keep client money separate from their own and remit the same within a reasonable time.  Attorneys are ethically prohibited from tactics such as “slow paying” a customer and lawyer trust accounts are subject to audit by the State Bar.  There are many collection agencies that don’t place client money into a separate account.  Some don’t pay their clients at all. 

Question:            Can an attorney settle my case without my permission?

Answer:            No.  This is a tactic used only by collection agency employees attempting to make commission for a certain month.  An attorney is forbidden by law from settling a client’s case without consent from the client. 

Question:            What can I do if I have been a victim of unfair and deceptive practices by a collection agency.

Answer:            Contact an attorney immediately.  You should follow the advice of your attorney, but insist that litigation be initiated in a timely manner.  Most collection agencies are not in business for more than a few years and waiting to file a lawsuit can be very costly.

Question:            Can The Van Dyke Law Firm represent me in a case against a collection agency.

Answer:            Maybe.  Criminal law and post-judgment receivership is my primary practice area.  Civil matters are occasionally accepted if they meet my firm’s underwriting criteria.  If I am not able to accept your case, I will likely be able to refer you to another attorney who can.