Determining the cost of skip tracing to your collection law practice is much more detailed than it seems. Certainly, in today’s highly regulated environment, the cost is higher today than in past years.
The first question today revolves around who is your skip tracing vendor. Is the company well known like TransUnion or is it a smaller company using a more manual process? One of the big issues today is the concept of a Vendor Management Program. Many clients today expect law firms to have a detailed program where the law firms would “onboard” the skip trace vendor.
Now in many instances, this process may be easy because the vendor is large, well known in the industry, and might even be used by the client. In these instances, while the law firm must still complete the onboarding process of the vendor, the client is not likely to scrutinize the vendor; in other instances, not so much. Specifically, your onboarding process must determine whether the skip trace vendor has access to Non Public Information (NPI). In these instances, the scrutiny by the law firm must be much more strict. For example, what access does the vendor have to your database? Do they have complete access or partial access?
This brings up the whole “audit” question during the onboarding process of your vendor management program. Clients have asked me, “how do you know that the vendor’s access to your system is locked down.” The response cannot be, “because they said so and checked the box on the questionnaire.” This is a big deal today. You need to audit these vendors or have a third party audit these vendors to make sure what they are saying meets and exceeds your approved compliance standards.
Once you determine that the vendor is ready to go, the next step should be easy! Well, not so fast. Have you reviewed the contract with the skip trace vendor recently? This needs to be reviewed to determine hidden costs. For example, what does the contract say about “put backs?” These are the files where the information provided by the vendor cannot be utilized. An example might be if there was a bankruptcy on a particular file or where a consumer is no longer employed. In these instances, the vendor may return the skip trace costs to you. Depending on your volume, these hidden costs may become significant.
Another aspect of the contract is the manner in which you are charged for information received. Is it no hit no fee or do you get charged a certain amount for hits and a lesser amount for others?
What about the nature of the data you send to and receive from the vendor? In simple terms, how much work does your staff need to do to send the files to the vendor and how much work does staff need to do to append the information to each file? As you begin a relationship with a vendor, be sure you work through this process as it could be a source of increased time and expense.
The cost of evaluating the vendor is also a key element in your process. This needs to be detailed at the beginning of the process. You need to determine the type of account, client, balance, and location of the account prior to sending to a vendor. One of the first questions you and your team need to determine is what files are you going to send to the particular vendor. The answer to this question generally exists within a sub-process of evaluating your vendors. Detailing the decision making process for file submission will help you evaluate your vendor in the future. Let’s assume we are looking at place of employment vendors for purposes of this discussion. In my experience, most people gravitate to the least expensive vendors. While that is understandable, I often ask the question about why we are not using more expensive vendors.
Spending more up front on verified data increases the likelihood of a positive result without adding to the hidden costs in the form of multiple filings, multiple processing, and multiple attorney reviews. The benefit to faster liquidation becomes the expected result. Analyze the cost per hit, contingency fee rates percentage, and the balances sent to see the results.
This area of skip tracing for collection law firms has been taking many turns over the past two years beyond sending files to the usual suspects of vendors. As you can see, there are a lot more hidden costs today than in years past.
Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA. Contact him at