MAFIA's Quick Guide To Hiring A Private Agency

Not all private agencies are created equal. Each agency operates differently - and will handle your case according to its own policies and requirements. For the most part, private agencies are not regulated by any government agency - which means that you as the consumer needs to take the time to ensure that the agency you are dealing with is reputable. Print out the following guide so that you will know what questions to ask - and know what the answers should be.

Application Fees: The majority of private agencies charge an application fee. This fee covers setting up your case and also creates a commitment between you and the private agency. Some agencies may say that they do not charge an "up front fee" - but will take a large fee out of the first collections that are received. Agencies that charge application fees that are higher than the "average fee" are generally using the services of independent marketing agents. When you pay the application fee, all, or the majority of the fee is being paid to the marketing agent for the services that they provide.

Average Application Fee: $25.00
Highest Application Fee: $350.00

Contingency (Collection) Fee: Every private agency takes a percentage of every dollar that is recovered. These fees range from 20% to 50%. This fee is payable only if the agency is successful in recovering money for you.

Average Fees: Most agencies charge between 25 and 30% of all money that is recovered.
Duration of Fee: The majority of agencies will continue to receive this fee until all arrearage, plus interest as allowed by law, has been paid in full. This fee applies to all money that is paid - including current child support. However, some agencies will not take a fee on current child support if the payments have been made by the non-custodial parent on a regular basis for at least 6 months prior to your case being placed with the agency.
Caution: We have found one agency that charges only 25% - and will take that fee for only one year, at which time they will no longer be involved in your case. Other agencies have tried that concept, and all have subsequently gone out of business. Use extreme caution in dealing with an agency that has this type of fee arrangement.

Agency Memberships: Some private agencies belong to professional trade associations. There are three primary trade associations that private child support agencies can belong to. Only two of those trade associations provide clients of the agency any protections. A fourth organization also provides Internet listings for private agencies that agree to follow a code of ethics.

American Collectors Association: The ACA has strict membership requirements and provides limited services for clients of private agencies. This trade organization is primarily for consumer collection agencies, but does have a separate program for child support agencies. Agencies who are members of the ACA must demonstrate that they are financially solvent and agree to adhere to a strict Code of Ethics. Membership dues for ACA members are in excess of $500 per year.

National Child Support Enforcement Association: The NCSEA is an organization that primarily represents public (IV-D) child support enforcement agencies. This association does allow private child support agencies to join as well. There are no requirements on any agency to join the NCSEA other than a stated interest in child support issues and matters. The NCSEA does not provide any services for clients of member agencies. Membership dues for NCSEA members begin at $50 per year for individual memberships and are $500 per year for "corporate sponsorship" memberships.

Licensing: Most states do not require private child support collection agencies to be licensed at this time. This is slowly changing. If an agency is required to be licensed, it may be required by the state licensing authority to follow certain state rules and regulations that would provide protections to the perceived rights of the non-custodial parent and allow him or her to continue to avoid the payment of the child support that is owed. Two states that have imposed this type of requirement on private child support agencies are Colorado and Minnesota.

Bonding: There are a number of different types of bonds available - and even though an agency claims that it is "bonded" does not mean that the consumer of the agency will be protected. The only type of bond that will protect a client of a private agency is a "fiduciary" type of bond - one where the client is guaranteed of receiving any money that the agency has handled on behalf of the client. Agencies who are members of the ACA are all able to provide this type of bond. If the agency states that there is a bond in place, ask for a copy of that bond.

QUESTIONS TO ASK A PRIVATE AGENCY

How long have you been in business? The longer that a private agency has been in business, the greater the chances are that the agency will be able to meet all, or some of your needs. Since the private industry started, only one in three private child support collection agencies have remained in business over 3 years.

Have you always operated under the name of [the agency you are contacting]? Most agencies have always operated under the same name. However, some agencies have changed their name a number of times. This could indicate problems with the agency.

Where are you located - what is your physical address? You need to know the physical address of the private agency you are using in the event that you have a dispute with the agency and need to initiate legal action against the agency. If you are close to the agency, you may also wish to visit the agency in person to see it in operation.

Tip: Some private agencies operate as a home based business. There is nothing wrong with this - and some agencies have been doing this for a number of years and are successful. As a result, they may not be willing to provide you with their physical address. If this is the case, check out the agency carefully - and if they meet all of your other requirements, you probably do not actually "need" their physical address.

Tip: Some private agencies may claim that they are unable to provide their physical address to you because of "security concerns". Whilst we do live in a society that is increasingly violent, MAFIA believes that this type of concern is "exaggerated". There are no known reported incidents of a private agency, or its employees being attacked, despite numerous threats.

Tip: Call Directory Assistance in the city that the private agency is located. See if their physical address is listed - or if it is just a Post Office Box - or no address at all. (You can ask for the address of any listing in Directory Assistance) Do this even when they tell you what their address is - to make sure that they are not giving you the address of their Registered Agent or some other address. If the addresses are different - call them back and ask them "why".

Are you incorporated - and in what states? The reasons that a private agency will be incorporated are often for business and financial reasons. The mere fact that an agency is incorporated does not mean that it is ethical and honest. It is extremely easy to become incorporated in any state. All that is required is an Articles of Incorporation and the payment of an annual fee. By being incorporated, the office holders of the Corporation have limited liability if the Corporation or business fails.

Tip: If the agency is incorporated, check with the Secretary of State to determine if they are in "good standing". Many states have this information available on the Internet and can be located by visiting the individual state's web site. If the agency is not listed as being in "good standing" - MAFIA recommends that you avoid the agency.

Tip: If the agency is not incorporated - don't worry too much. There are some good reasons why an agency would not be incorporated. Make sure that the agency meets all of your other requirements - and passes your other questions - especially on location, time in business, etc.

Are you a subsidiary of another business? Some agencies are part of a consumer collection agency. If they are - check out the consumer collection agency that they are part of - to see if they have been ethical. To do this - make inquiries of the licensing authority in the state, the Consumer Affairs Office provided by the state, and any trade and professional organizations that they belong to. If they are in good standing, then you know that the child support side of the agency will also be in good standing.

What is/are the name(s) of the principal owner(s) of the agency? This is good to know if you have any doubts about the agency. You can use this information to determine if the agency has been changing names. You can also find this information through the Secretary of State - and then do a search of those names to determine if they either have, or have had, other businesses.

What organizations are you a member of? Remember - there are only two organizations that actually provide you with any type of protections or security - the American Child Support Collection Association and the American Collectors Association. MAFIA would recommend that you avoid an agency that is not the member of at least one of these two professional organizations. An agency that will not join a professional organization may not be able to meet that organization's membership requirements, which should be a warning to all potential clients. Remember, membership in the National Child Support Enforcement Association provides you with absolutely no protection and is not an indication that he agency is ethical and honest. Also, membership - or lack of membership - in the Better Business Bureau is not an indication of anything.

Am I talking directly with the agency, or an independent marketing agent? Many private agencies use the services of a "marketing agent" who is an independent contractor, and not directly affiliated with the private agency. Some agencies have strict control over their marketing agents, others do not. As a result - if you want full answers to your questions, it may be necessary to contact the agency directly.

Recommendation: If the individual you are talking to is a marketing agent, we suggest that you ask for the telephone number of the private agency so that you may talk directly to the agency - not an independent contractor. After your questions have been answered to your satisfaction, and you wish to use the services of the agency, then it is permissible to go through the marketing agent.

Tip: If the agency charges an application fee in excess of $50 - it probably uses independent marketing agents. The higher application fee that you are paying is how the marketing agent makes his or her money.

Tip: An independent marketing agent may make claims or promises to you that the private agency will not honor. That is why re recommend that you contact the agency directly. If the marketing agent will not give you the toll free phone number of the agency - then it is possible that the marketing agent does not trust the agency to pay him or her their commissions for making the "sale".

Tip: The amount of the application fee that is charged does not indicate that the agency is better than any other agency that charges a lower application fee - or a higher application fee.

What is your success rate? It is good to know this information - however - do not place too much faith in whatever you are quoted. There is no way that you can prove - or disprove - what they claim. Agencies are not audited by any government or independent source - so they can tell you anything.

Tip: No agency can make any guarantees of success for you, or any other client.

Is your application fee refundable under any circumstances? Most agencies contracts state that the application fee is non-refundable. However, some agencies may refund your application fee if they determine that they can not assist you after receiving and reviewing your case. This is an extremely important question to ask if the application fee is more than $50. If it is not refundable - then you may wish to avoid the agency. If it is refundable - get it in writing! Even better - tell them that you will pay the application fee after they have received the case and advised you in writing of what they believe they can do for you.

Tip: If the application fee is less than $50 - do not expect the agency to provide that type of information to you. While $50 or less may be a significant part of your budget - the agency may not accept your case with they type of requirement. With lower application fees, the agency is not going to want to invest money and time in providing a written response to you as they are not making any money off from your application fee.

How often can I get updates on the status of my case? All agencies provide this type of service - however some may limit the number of updates that you can get. With this question, you want to ask other questions as well:

When I call for an update, will I be able to talk to a real live person - or will I get voice mail? Some agencies use only voice mail for contacts with their clients. Find out what the "turn around time" is - how long does it usually take for a response to be provided to you.

Can I get an update via e-mail? This is actually easier for the agency - and the client. Find out what the "turn around time" is - how long does it usually take for a response to be provided to you via e-mail.

Tip: If you call the agency's main number initially - and get voice mail during regular business hours - the odds are that they use voice mail for all contacts with their clients and your abilities to talk to a "live person" are going to be limited.

Note: Some agencies periodically use voice mail when all other lines and agents are busy - so try calling them again in 15 to 30 minutes intervals. If you get voice mail again after 4 or 5 tries - see how long it takes for them to get back to you when you leave a message. When leaving a message - provide as much information as possible - and leave your telephone numbers at least 2 times in the voice message. Speak the number clearly and slowly.

Do you initiate legal action against the non-custodial parent and under what circumstances? Some agencies will initiate legal action against non-custodial parents - while others will not. Each agency has special requirements for initiating legal actions against individuals - and you need to be aware of what those policies are. Most agencies will not initiate legal action unless it is believed that the non-paying parent has substantial assets. Some agencies will initiate legal actions against non-paying parents only if he or she is in their normal "trade area" - such as in the same county that the agency is physically located. Obtain a clarification on this policy.

Ask if the agency has a written policy for clients on legal actions.
Ask what the financial requirements are to the client for those actions.
Ask if the agency will initiate legal action in other states.

Tip: Don't expect a definitive answer as it will apply to your case from any agency. You are only seeking general answers here as there are many factors that have to be considered in each case when legal action is being considered. Some of those factors include the history of the courts in the area where the non-custodial parent is residing; the past history of the non-custodial parent if he or she has been hauled into court before; details on his or her credit bureau report, the amount of child support that is owed, etc.

Does the agency follow the Fair Debt Collection Practices Act? This is more commonly known as the FDCPA - and was designed to protect debtors from abuses by consumer collection agencies. There are a number of court decisions that state that child support collections are exempt from the FDCPA, yet some agencies do follow either all of the FDCPA or portions of it. Agencies that follow this particular law claim that it does not affect their ability to collect the money that is owed to you, yet they also will claim that the FDCPA is restrictive and makes the collection process more difficult.

Tip: An agency that follows all of the FDCPA may not be able to obtain the results that you desire. Consumer collection agencies (all of whom are required to follow the FDCPA) are generally collecting money in 50% or less of the accounts that are placed with them for collection. How this type of success rate applies to child support collections is unknown.

Tip: An agency that follows portions of the FDCPA may do so for any number of reasons. If the agency does follow portions of the FDCPA it is important to discover what portions they do follow. Questions to ask are:

Do you make third party contacts and advise those people that you are contacting them about un-paid child support? This includes neighbors, relatives, current and former employers.

Do you continue contacting the non-paying parent after he or she advised you in writing or in person that they do not want to be contacted anymore?

Will you contact a non-paying parent at his place of employment even if you can contact him at his place of residence?

Do you threaten the non-paying parent with the possibility of legal action being taken against him or her - even if you have no intention of pursuing legal action?

When you receive money for me - how long does it take for you to disburse the money to me? Some agencies disburse money the same day that it is received - others disburse only one time a week, or at other frequencies.

Note: Most agencies hold money for 10 days if it is paid with a personal check by the non-custodial parent or anyone on his or her behalf.

Will I be required to close my case with the state agency? Some agencies have this requirement. If you close your case with the state agency you will have to go through their whole process again at a later date if you decided to re-open the case with that agency if the private agency is not successful for you.

Do you, as a matter of policy, require the non-paying parent to make payments through the court or directly to your agency? This is an important question to ask. If the non-paying parent is required to make payments directly to the agency you have no way of finding out exactly how much money is actually being paid by the non-custodial parent. Avoid agencies that have the policy that all payments must be made to them directly and not through either a public agency or the courts.

Tip: If your court order required that payments be made directly to you, then there is not a court agency that the money can be sent to. If your court order has this type of arrangement, make sure that you are comfortable with the private agency before placing your case with them.

Do your collectors only work in your office - or do they go out in the field and attempt to make direct, personal, face-to-face contact with the non-paying parent? Agencies that have collectors that work only in the office of the agency are restricted to making contact with the non-paying parent by either telephone calls or letters. This means that the non-paying parent can ignore the agency - especially if the agency is strictly following the FDCPA. If the agency's collectors go out in the field and attempt to make direct contact with the non-paying parent, the agency may have a greater success rate.

Do you report the child support delinquency to any of the credit bureaus? Some agencies are not able to report child support delinquencies to credit bureaus if the delinquency has not been reported by another agency. All child support delinquencies should be reported to the credit bureau as it can provide incentive to a non-paying parent to pay the child support delinquency.

NEXT: Check 'Em Out and Warning Signs