How to cut collection legal fees without cutting corners

Walker White

December 5, 2022

There’s more to managing the collection of legal expenses than simply using contingency fees. After all, the largest expense line in most collection-litigation programs is legal fees.

Simply demanding lower fees can be counterproductive. In this new age of increased regulatory scrutiny, creditors can’t afford to have their law firms cutting corners.

Today, leading-edge creditors are using technology to reduce their legal costs while at the same time making their litigation programs more effective. New cloud-based systems can simplify information flow and collect benchmarking data needed to optimize the use of resources.

The result: Lawyers spend less time tracking down information and more time collecting debts and ensuring compliance.

Here are four of the best techniques for improving the efficiency of collections litigation:

Automation-driven efficiency. Cloud-based technology centralizes communication and document management. Streamlined workflows can substantially reduce the time and labor that law firms spend handling each account.

Centralized vendor management. Collections law firms rely on outside companies to perform many of the functions they need to service accounts. These functions include process service, account scrubbing (to prevent collections for deaths, bankruptcies, and active service members), letter mailing, and asset searching. Rather than relying on individual firms to select vendors, creditors can negotiate umbrella contracts, often at preferential rates, for use by all their law firms.

Data-informed firm selection and service-level-agreement management. With good collection litigation software, creditors can now calculate benchmarks for velocity and recoveries in each jurisdiction. If one law firm is underperforming, a creditor then has the information to negotiate tighter service-level agreements or even shift accounts to another firm in that state.

Restructured fee arrangements. By reducing the time and effort law firms need to spend on each case, creditors are in a strong position to negotiate lower fees. Some lenders may even choose to move away from the standard contingency-fee model entirely. Instead, they can negotiate flat fees for lawyers to perform specific services, such as sending demand letters and filing complaints. (If the case results in a judgment, it may be appropriate to set the fee for asset recovery as a percentage of the amount collected.)

Creditors that automate their collections litigation not only find ways to reduce legal costs, they also reduce errors, improve compliance, and increase the velocity of recoveries. Learn more by downloading the Oliver Guide: “High Performance Collections Litigation: Five ways analytics and automation can increase recoveries, improve compliance, and reduce hassle.”

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