Why partnerships between banks and debt collecting agencies are created?

Banks deal with internal debt collection challenges because of overdrawn checking accounts and past due loans. These challenges, include overdrawn checking, or demand deposit accounts, where customers have depleted the funds and overdrawn their account. ATM errors and losses, as well as bank teller mistakes add to a bank's losses. Others would be returned items, such as customers depositing bad cheques. Delinquent loans are another major area of concern. These delinquent accounts can be saved with early intervention, however. Debt collection agencies, if introduced early in the process in the crucial 30 - 60 day timeframe, are very successful with diplomatic communications intended to get the customer re-connected with the bank and resolving their delinquencies. This process could also help banks sort out and better isolate the "soft" delinquencies from the more serious accounts to be outsourced. If used early enough, many of these accounts can be restored and prevented from being written off. Debt collection agencies are helpful in acting as a tactful and neutral third party which could motivate past due customers to make the necessary provisions to make their accounts current. Besides, it is more serious to receive communications from a debt collection agency. Agencies charge a small fee and these are much less expensive than the staffing necessities, expenditures and resources vital to recoup these accounts in house.