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Debt Collection Agency Insurance Policy Information

Debt Collection Agency Insurance. If you operate a debt collection agency, you provide a very valuable service to the business that you work with; however, you also face a lot of risks.

Collection agencies are retained by clients to collect accounts on which borrowers are delinquent in making payments. Although many collection agents work as subcontractors for their clients, others will purchase bad debt from a business, typically for about 10% of the balance due, and will earn money based on whatever difference they are able to collect.

Collection agencies have several unique and severe exposures, including allegations of personal injury such as libel, slander, and invasion of privacy. The agency must verify that its clients have proper grounds to initiate collection proceedings.

Collection agencies must be very careful that their own acts, such as the wording of mailings, language in phone calls, and trespassing when entering the premises of others, are conducted in a legal manner.

Any personal item stored in recovered items must be set aside, secured, and returned to its owner. Recovered vehicles may be stored in a garage or in an open lot outside the building. The recovery company may sell the vehicle on behalf of its lender client.

In order to properly protect yourself from these risks, it is absolutely essential that you invest in the right type of Debt collection agency insurance coverage.

Debt collection agency insurance protects your collections firm from lawsuits with rates as low as $97/mo. Get a fast quote and your certificate of insurance now.

Below are some answers to commonly asked collections agency insurance questions:

• What Is Debt Collection Agency Insurance?
• How Much Does Debt Collection Agency Insurance Cost?
• Why Do Collection Agencies Need Insurance?
• What Type Of Insurance Do Debt Collectors Need?
• What Does Debt Collection Agency Insurance Cover & Pay For?

Collection Agencies Risks & Exposures

Premises liability exposure is often minimal since most client contact is done electronically or by mail. If clients visit the premises, they must be kept in designated areas so that they cannot view or overhear conversations regarding others clients' confidential information.

To prevent slips, trips, or falls, all areas accessible to clients must be well maintained with floor covering in good condition. The number of exits must be sufficient, and be well marked, with backup lighting in case of power failure. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. If the collection agency handles repossessions, there may be extensive off-site exposure.

Personal injury exposures are very high and can include allegations of assault and battery, libel, slander, and invasion of privacy. Policies concerning employee conduct should be established with periodic training provided. There is product liability exposure if the recovery company sells repossessed items for its customers.

Professional liability exposure is high because of the confidentiality of client relationships and the various legal aspects of reclaiming clients' property. Collection agencies are subject to very strict regulations imposed by various levels of government. Procedure manuals, letters sent, and phone conversations must all be legal and regularly reviewed to ensure that they comply with the current statute. In the case of repossessions, documentation must include details as to the condition of the property at the time of repossession, since allegations of damage are often made against the collection agent.

Workers compensation exposure is high if collection agents visit the premises of their clients' customers or if any type of repossession is done. Employees should be properly trained and supervised. During the repossession process, borrowers may threaten or physically attack employees. Procedures to avoid and prevent confrontations must be in place. Weapons should not be permitted. All call stations must be ergonomically designed to prevent repetitive motion injuries. Workers can slip and fall, incur back injuries, or be involved in automobile accidents.

Property exposure is generally limited to that of an office. Ignition sources include electrical wiring, heating, and air conditioning systems, wear, and overheating of equipment. If goods are repossessed and stored on premises, each must be separated and categorized for the client. If vehicles are repossessed, gasoline, oils, and lubricants inside the stored vehicles will increase the fire hazard. Necessary protection, often including scheduling specific insurance on the reclaimed property, must be taken for the type of item collected. Recovered property can be targeted for theft and vandalism from angry borrowers.

Appropriate security controls must be taken including physical barriers such as fences or gates, lighting to deter access to the premises after hours, and an alarm system that reports directly to a central station or the police department.

Crime exposure is from employee dishonesty. Records must be kept and receivables regularly accounted for. The hazard is substantially higher if repossessions are made because some goods can be easily converted. Hazards increase without proper background checks, monitoring procedures, and securing all records to prevent unauthorized access. All job duties, such as ordering, billing and disbursing should be separate and reconciled on a regular basis. Receipts should be issued for any cash payments received. Bank deposits should be made on a timely basis to limit the buildup of cash on premises. Regular inventories and audits are very important.

Inland marine exposure is from accounts receivable if the agency offers credit, computers, and valuable papers and records for clients' and borrowers' information. Power failure and power surges are potentially severe hazards. A morale hazard may be indicated if the insured does not keep valuable papers and disks in fireproof file cabinets to protect them from smoke, water, and fire. Duplicates should be kept off site to aid in restoration in the event of a loss.

Business auto exposure is generally limited to hired and non-owned. If vehicles are provided to employees, there should be written procedures in place regarding personal use by employees and their family members. All drivers must have appropriate licenses and acceptable MVRs. Vehicles must be maintained, and records kept in a central location.

If the agency handles repossessions, drivers must be trained in the transport of a variety of goods. Tow truck operators often must act quickly and surreptitiously to remove a repossessed vehicle before the borrower returns. This could result in incorrectly attaching the recovered vehicle to the tow truck. The vehicles may be required to operate quickly in parking lots and other areas where children and other persons may be present, resulting in bodily injury.

If repossessed vehicles are kept on premises, garagekeepers coverage will be needed. Keys to these vehicles should be kept in a locked box inaccessible to non-authorized employees.

What Does Debt Collection Agency Insurance Cover & Pay For?

Debt collection agencies are often sued for various reasons. Common reasons include:

Violation of the Fair Debt Collection Practices Act (FDCPA): This act protects consumers from abusive, deceptive, or unfair debt collection practices. If a debt collection agency is found to have violated the FDCPA, they can be sued by the affected consumer.
Insurance solution: A Professional Liability Insurance policy, also known as Errors and Omissions (E&O) insurance, can help cover legal defense costs, settlements, and judgments in case the agency is sued for violating the FDCPA.

Harassment or abusive behavior: This includes excessive or threatening phone calls, using obscene language, or making false threats to sue the debtor.
Insurance solution: Commercial General Liability (CGL) insurance can help cover the costs of lawsuits related to harassment or abusive behavior claims. This policy can cover legal fees, court costs, and any awarded damages.

Invasion of privacy: If the debt collection agency discloses the debtor's personal information to unauthorized third parties, they can be sued for breach of privacy.
Insurance solution: E&O insurance can also help in cases where the agency is sued for invasion of privacy. The policy can cover legal defense costs, settlements, and judgments.

Improper credit reporting: If a debt collection agency provides incorrect information to credit reporting agencies or fails to update the debtor's credit report after the debt has been paid, they can be sued.
Insurance solution: E&O insurance can cover legal expenses, settlements, and judgments in cases of improper credit reporting.

False representation or deception: This includes misrepresenting the debt amount, the identity of the debt collector, or using deceptive tactics to collect the debt.
Insurance solution: E&O insurance can help cover costs associated with lawsuits related to false representation or deception claims.

Unauthorized collection fees: If a debt collection agency attempts to collect unauthorized fees or interest from the debtor, they can be sued.
Insurance solution: E&O insurance can cover legal expenses, settlements, and judgments in cases of unauthorized collection fees.

To minimize the risk of lawsuits, debt collection agencies should ensure compliance with all applicable laws and regulations, provide proper training to their employees, and maintain comprehensive insurance coverage. By having the right insurance policies in place, debt collection agencies can protect themselves from the financial consequences of lawsuits and focus on their core business activities.

Commercial Insurance And Business Industry Classification

• SIC CODE: 7322 Adjustment and Collection Services
• NAICS CODE: 561440 Collection Agencies
• Suggested Workers Compensation Code(s): 8742 Salespersons or Collectors - Outside

7322: Adjustment and Collection Service

Division I: Services | Major Group 73: Business Services | Industry Group 732: Consumer Credit Reporting Agencies, Mercantile

7322 Adjustment and Collection Service: Establishments primarily engaged in the collection or adjustment of claims, other than insurance. Establishments primarily engaged in providing credit card service with collection by a central agency are classified in Finance, Industry 6153; those providing insurance adjustment services are classified in Insurance, Industry 6411; and those providing debt counseling or adjustment services to individuals are classified in Industry 7299.

• Adjustment bureaus, except insurance adjustment agencies
• Collection agencies accounts

Debt Collection Agency Insurance - The Bottom Line

If you operate a collections agency in, making sure that you invest in the right type of insurance coverage is the best way to protect your business from a number of inherent risks. To find out exactly what type of debt collection agency insurance you require and how much coverage you need, speak with a reputable commercial insurance broker who knows the debt collection business.

Additional Resources For Professional Services Insurance

Get informed about small business professional services insurance, including Professional liability, aka errors and omissions (E&O insurance), that protects your business against claims that a professional service you provided caused your client financial loss.

• Accounting
• Actuaries
• Answering Service
• Architects
• Armored Car
• Attorney Lawyer
• Auctioneer
• Auditor
• Background Music Services
• Bookkeeping
• Business Consulting
• Chemical Engineers
• Civil Engineers
• Claims Adjuster
• Commercial Laundries
• Commodity Broker
• Corporate Wellness
• Couriers
• Court Reporter
• Credit Bureaus
• Debt Collection Agency
• Draftsman
• Detective Agency
• Diaper Services
• Electrical Engineering
• Engineering
• Environmental Consultant
• Executive, Career & Life Coaching
• Executive Search Firm
• Expert Witness
• Financial Planner
• Financial Services
• Funeral Directors
• HR Consultant
• Inspection Bureaus
• Insurance Agents & Brokers Insurance
• Interpreter
• Mediator - Arbitrator
• Medical Billing
• Music, Drama & Dance Therapy
• Notary
• Office Machine Repair & Maintenance
• Piano Tuners
• Project Management
• Safety Consultants
• Speakers Bureaus
• Stockbrokers
• Surveyor
• Tax Preparer
• Temporary Staffing
• Title Abstractors
• Valet Parking
• Specialty Consultants
• Specialty Service Business

The professional services industry, which includes occupations such as lawyers, doctors, accountants, and architects, often deals with sensitive and complex issues that carry a high risk of liability. These professionals are expected to provide their clients with expert advice and guidance, and any mistakes or oversights can result in significant financial consequences for both the client and the professional. This is where insurance comes into play.

Business insurance provides protection against the financial repercussions of potential mistakes or accidents that may occur while providing professional services. For example, a lawyer may make an error in their legal representation that leads to a financial loss for their client. Without insurance, the lawyer would be personally responsible for covering the cost of this loss. Insurance helps to protect professionals from these types of financial burdens and allows them to focus on providing high-quality services to their clients.

In addition to protecting against financial losses, commercial insurance can also provide legal defense for professionals facing legal action as a result of their work. This can be especially important for professionals in high-stress or high-risk fields, such as doctors or architects, who may be at a higher risk of being sued for professional negligence.

Overall, the professional services industry needs insurance to protect against financial losses and legal action, ensuring that professionals can continue to provide high-quality services to their clients without the added stress and burden of potential financial consequences.

Minimum recommended small business insurance coverage: Business Personal Property, Employee Dishonesty, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Professional Liability, Umbrella Liability, Hired and Non-owned Auto Liability & Workers Compensation.

Other commercial insurance policies to consider: Building, Business Income with Extra Expense, Earthquake, Equipment Breakdown, Flood, Computer Fraud, Forgery, Money and Securities, Special Floater, Cyber Liability, Employment-related Practices Liability, Business Auto Liability and Physical Damage and Stop Gap Liability.