How could a collection agency owner get away with stealing $100,000 it collected for a client? Well, the agency owner got away until she was caught – after years of padding her pockets.

Now, she faces 10 years in prison.

There were two breakdowns that allowed this to occur:

• First, the client failed to do any due diligence. If it had done even basic research, it would’ve known that the collection agency wasn’t included in any of the appropriate databases in the country. The client also would’ve learned that the collection agency wasn’t registered with ACA International. These are two pretty obvious red flags.
• Second, even when the business relationship began to run off the rails, the client stayed along for the ride instead of stepping off. The company relocated to a new state, business dried up, and eventually, this client was the only one left. Then, payments from the agency began arriving late; finally, no payments were received. That’s when the client determined there might be a problem.

This client wasn’t the first business victimized by collection payment fraud, and certainly won’t be the last. But this also wasn’t a poorly-run business. The people in charge really should’ve known better.

The lesson here is that collection agencies deserve the same scrutiny you accord your vendors, because a lot is often at stake.

And don’t be too tough on collection agencies: An ACA International study shows that collection agencies recovered $40 billion in 2007.

Perhaps you could file this one in the “one bad apple” bin.

Tags: ACA International, collector, due diligence, fraud