Using a Collection Agency to collect debt from prior tenants

[Melissa Faraias]

Hello BP community,

I am an out of state landlord with a rental in Bluffton SC. After a few months of trying to work with my long term tenants (who have previously always paid rent on time), I finally asked them to leave for non payment of rent. They chose to leave voluntarily to avoid an eviction and signed a document agreeing to pay the back rent payments owed (which is a significant amount). However once they completely moved out, they refused to answer my calls and messages. I reached out to a debt collection agency called National Credit Systems Inc. in an attempt to collect the payments owed. Has anyone used this agency or any debt collection agency and has had success with it? Even if I do not recover the money, I do want to have them reported to the credit bureaus etc. so that they do not do this to another unsuspecting landlord in the future. Thank you in advance for your input. 

[Carlos Hennings]

As a former collection agency owner, I can share that recovering past-due rent is challenging, primarily due to difficulties in locating or contacting the former tenant. To improve your chances, ensure you collect as much information as possible upfront, such as emergency contacts, employer details, and references. This will aid in the skip tracing process.

When selecting a collection agency, verify that they report to all three credit bureaus and ask about their reporting timeline—some agencies wait 30-90 days as leverage to encourage payment plans. Additionally, look for an agency that not only sends letters but also makes calls, and consider those that work on a contingency basis, as this aligns their success with your recovery efforts.

Be aware that collection fees in this industry can be high, often around 50%, due to the extensive skip tracing and effort required. To protect yourself, consider adding a lease clause stating that tenants are responsible for legal and collection fees. While this does not guarantee full recovery, it can help offset costs. Working closely with your agency and following their guidance can improve the likelihood of collecting what is owed. Hope this helps.