The word skip tracing often evokes images of dimly lit rooms filled with collectors poring over old phone books, “Cole’s crisscross” or college directories looking for a consumer or business that seems to have dropped out of sight.   Today, the world of skip tracing has evolved into a highly technological and potentially expensive proposition with vendors ready to deliver your consumer to you.  The trick in today’s litigious society is to balance the need to locate consumers and at the same time ensure that the firm remains in compliance with various debt collection laws.
 

A decision that all firms must face is whether to utilize their collectors to devote part of the day or month to skip tracing or to outsource the function entirely.  The advantage of outsourcing your skip tracing needs to a vendor is that your collectors can spend more time talking to consumers, potentially resulting in more effective recoveries.  One immediate downside is that your files have now left your possession – do you know where your debtors are? Will your clients allow this type of arrangement, and what type of protections will your clients want to ensure that their consumers’ data is safe?
 

It is extremely important to ensure if you outsource any of your skip tracing needs that you know who you are dealing with.  Do they have a license, carry proper insurance, and can they provide solid references?  Find out HOW they skip trace.  All processes need to comply with GLB, FDCPA, FTC and FCC regulations.  If the company you are considering won’t tell you how they obtain their information, then you should steer clear.
 

Some firms are now moving towards a “waterfall” approach in four stages to address their skip tracing needs:
 

The key difference among each stage is the cost and level of verification of the information obtained.  If the debtor is bankrupt, deceased or incarcerated there is no need to open a file, you can close the file and return it to the sender.  If the information you are seeking is found using the next level search solution, there’s no need to escalate to costlier 3rd or 4th level solutions. 

 

Upon receipt of a portfolio and before we send any demand letters, a batch file is created and sent to a company such as Accurint which has a product named Banko.  Banko can help reduce your exposure to potential FDCPA violations by identifying those consumers that have filed or have been discharged in bankruptcy before you send your first demand letter.  Additionally, Accurint can scrub your files for deceased consumers, and perform address correction, which could reduce the amount of misdirected mail pieces.  By using Accurint/Banko or a similar product you will have reduced the amount of return mail saving you postage and at the same time screen out the bankrupt consumers at the front end prior to any collection effort.  

 

The next stage in the “waterfall” is to pick off the low hanging fruit by using as many free and publicly available online sources.  For example, you can easily verify property ownership if your county assessors list this information online.  Phone numbers and other asset information can be found online these days.  Our collectors are having great success locating employment and other valuable information by searching social networks such as Linked in www.linkedin.com, Facebook www.facebook.com or even MySpace, www.myspace.com.  It’s amazing what information people will post online!  If you have a permissible purpose under FACTA, you can take advantage of a tool that all the credit bureaus offer:  a triggering mechanism that allows you to get a report whenever a consumer applies for credit or changes employment.  In addition, there are some relatively inexpensive online skip tracing tools such as Accurint, www.accurint.com or Acxiom Insight, www.acxiominsight.com your collectors can use.  It is important to use more than one source because they often pull information from different resources. 
 

After picking off the low hanging fruit, stage three in the “waterfall” approach is to consider using specialized databases to try and obtain hard to find information.  For example, Talx Corporation (a division of Equifax) has a product called “the work number,” www.theworknumber.com, which is useful in locating employment information.  Their database contains approximately 30% of the nation’s employment information.  Teletrack, www.teletrack.com, is a resource that specializes in the sub-prime space.  They maintain a database of high-risk consumer information provided by businesses that do not report to traditional credit bureaus such as payday loan and rent-to-own stores. 
 

The fourth stage of the “waterfall” approach is to send files to a company such as VeriFacts www.skiptracers.com or Synergy Solution, Inc. www.s2info.com to obtain a guaranteed locate.  The key difference with outsourcing to a vendor rather than using specialized databases as described in stage three is that databases tend to provide any and all results whereas outsourced vendors will dig deeper to attempt to validate the most recent and best result.  Of course, the trade off is that the cost tends to be more than when using database providers.
 

 

 

 

David Lippman is a shareholder at Lippman Griffeth & Associates, P.C. with offices in Scottsdale and Tucson Arizona.  Mr. Lippman, along with his partner George Griffeth, devote their entire practice to both retail and commercial debt collection as well as complex insurance subrogation litigation. Mr. Lippman is the current Arizona state chair for ACA’s MAP program and has worked in the collection industry for over 25 years.  Additionally, he is a frequent lecturer and author of articles dealing with the FDCPA and FCRA.