How to Choose a Collection Agency: Expert Insights from Connect1’s Bob Picone | Ep. 229

Adam Parks (00:08)
Hello everybody, Adam Parks here with another episode of the Receivables Podcast. Today I'm here with an industry legend, Mr. Bob Picone, a partner with Connect1. We're gonna talk about agency placements and identifying the right agency at the right time for the right product, which is, for lack of better words, an absolute art form. So how you doing today, Bob?

Bob Picone (00:31)
I'm great, Adam, how about yourself?

Adam Parks (00:33)
I cannot complain and if I did, would listen.

Bob Picone (00:36)
Nah, you don't know that. You don't know that.

Adam Parks (00:39)
Well, I appreciate you and I really do appreciate you coming on and I know that most of our audience is already going to be familiar with you and your organization. But for anyone who has not been as lucky as me to get to know you through the years, can you tell everyone a little bit about yourself and how you got to the seat that you're in today?

Bob Picone (00:55)
Yeah, sure. So way back in 1986, and I like to call myself legacy at this point, I started with Citibank in one of their call centers, heading up their Visa MasterCard charge-off division. And I was with them for about four years till I moved over to the Citibank side of agency management, where I ran recoveries for agency management.

Choosing collection agencies, ordering collection agencies, et cetera, et cetera. After about nine years, I left there, went to an agency in Philadelphia where I stayed for about 14 years. increased their growth by maybe 2,500 % over those 14 years. They went from about 100,000 a month in collections to

close to five million. And then they continued from there. One client, we were doing over a hundred million dollars a year. We were larger than any other agency out there. Continued to grow, expanded to a few different sites, a few different states. From there, we sold the company. I moved on to another independently owned agency in South Jersey, where I was there for seven years.

grew that company as well to a second site and then we sold to a very large agency Conglomerate in the business stayed on board for about a year or so Through the transition with the clients then I moved on to my own consulting firm our JP consulting group I was with that group For about a year and a half. I was doing some consulting work for a auto deficiency

bank in the south and I was there for about nine months. Increased their revenue in nine months by 21 million dollars. They asked me to stay on board but fortunately I like working for myself so at that point we're getting ready to do our first debt sale with them and I never did debt sales before so an industry veteran introduced me

reintroduced me to Nancy Hughes, my current partner today at Connect1. Nancy and I knew each other from way back when. We both worked for different agencies. were competitors. We both collected basically the same accounts and had great success. So since I never did the agency or the sale world before, I called Nancy. At the same time, Nancy, believe it or not, was getting ready to call me.

because she needed agency placements. So, you my expertise at the time was agency placements, agency management, her expertise at the time with debt sales. So it was kind of like peanut butter and jelly, worked great together. And then Connect1 was born. So we started Connect1 officially January 1st, 2017. Here we are today. We've grown exponentially for a couple of years. Every year's growth has been

Increasing and we've been very happy what we're doing. We do everything from debt sales agency management bankruptcy and deceased letter vendors credit card processing basically, we match the right vendor with the right client so if somebody comes to us and says they're looking for a solution we don't have every solution, but we have a good majority of solutions and

The reason we don't have every solution is because we vet out all of our vendors tremendously. Lisa Birch, is our VP of Client Services and Security and Compliance, who also has a big hand in our debt sale platform, does all of our due diligence on all of our folks. So everybody has to meet our strict due diligence and the due diligence of the industry in order to be brought on board with us.

Bob Picone (04:54)
We are one of a handful of RMAI certified brokers in the country and we need to keep those standards up. We go through an audit, I believe every two years. We just completed our most recent audit for the next two years. Pass that with flying colors. So when we bring a vendor on, regardless of the vendor or if we bring on anybody for that matter, credit grant or debt buyer, what have you, we have to make sure that they meet every standard debt.

is required because the last thing we want to do is have anybody fail that we introduce or have complaints which is just not accepted at all.

Adam Parks (05:26)
I love that. So you've basically taken your expertise, Nancy's expertise, rolled it into a consulting operation and providing, let's call it that first line of defense for creditors, as well as guiding and directing those creditors through some of the complex processes, because selecting an agency is not so easy. And I'm sure, Bob, that through the years, you've come across a number of different agencies that said, and I quote, well, I'm just the best at everything. And we...

Bob Picone (05:52)
Yeah, you

know, it's amazing when you when you're out there and you start talking to folks and everybody's the best. Everybody's number one on the batch tracks. Everybody leads everybody else. And I've never, you know, I never understood that. But I understand that's that's the tagline in today's world. We're the best. We do it the best. We're number we're number one. We're always number one. Not everybody can be number one. And it's OK to be number two or OK to be number three if you're in that margin of error, so to speak. So.

Bob Picone (06:18)
It's a very complex process today because again, we don't want to recommend an agency or a credit grant or a debt buyer to an agency if not everybody can make money on it because if it's a losing proposition You know, we're not going to have the agency coming back to us We're not going to have the debt buyer coming back to us So we have to wear the middleman who has to make everybody happy and we do our best to do

Adam Parks (06:40)
Well, it's never an easy process because you can find those agencies that are the best at auto paper between five and seven thousand average balance, but that does not mean that they're great at the low balance or that you should be sending them utility accounts or anything else like that. So talk to me a little bit about what that process looks like. Does it normally start with onboarding an agency or does it normally start with identifying a product for placement? You know, what comes first, the chicken or the egg?

Bob Picone (06:50)
Hard work. Right, right.

Yeah,

generally, generally it's the agency that comes first. We have a lot of agencies that come to us that want us to place business with them. And again, we have to be very careful with who we bring on because if an agency generates a complaint, which is just unacceptable today, and there's a good complaint and there's a nuisance complaint and there's a bad complaint, know, everyone's going to get the nuisance complaint. He told me to pay my bill.

It's the bad complaints that we just do not tolerate. We do not want to put the credit grantor or the agency in the position to fail and if you have a bad complaint, that's just going to generate bad press. So we won't use you again as an agency and most likely the know, the credit grantor is going to say hey, why should I use you Bob to recommend somebody to me if they're going to generate complaints. So first and foremost, we do a lot of due diligence on an agency. They have to be

Licensed everywhere they have to have be insured where they need to be insured They have to have very strong security and on and on from there There's an entire checklist that we have that's you know multiple pages long that we ask our agencies our debt buyers to fill out Prior to even discussing. Hey, we have somebody that wants to place with you this we want to have all this in advance because the last thing you want to do is

you know, say, this agency is great, but oh, wait, they don't work auto and you need to place auto, or they're not licensed in every required city and state. We want to make sure that's all out of the way up front. And we also have a program and Lisa, it goes through our security log and make sure that, you know, when licenses expire, when insurance expires, she sends a note to the agency to say, hey, you know, next month you're expiring.

Send us a copy of your insurance or send us the next expiration date, things of that nature. So we want to make sure everything is buttoned up upfront prior to introducing the agency to a credit grant or a debt buyer. Importantly, we need to make sure they're buttoned up 100%. If you're at 98%, we really can't use you.

Bob Picone (09:20)
It's just, it's important that everything is completely buttoned up upfront.

Adam Parks (09:25)
Well, it generates risk and that's the last thing that you want.

Bob Picone (09:27)
Yeah, no risk.

We'd rather put the effort in upfront than generate any sort of risk.

Adam Parks (09:31)

So one of the things that you mentioned was kind of doing an RFI on the debt buyer side as well. So on the creditor side, so you're really, as you're in between this transaction and trying to provide a service really to both ends of the equation or both sides of the equation, what does that look like? I haven't really heard that so much before really digging into those creditors and digging into those debt buyers, which I can see a significant value in.

but talk to me a little bit about what that process looks like and how you introduce that new idea to a potential creditor or debt buyer looking to make placements.

Bob Picone (10:07)
Yeah.

So maybe just a backup a little bit when it comes to our agencies, not every agency is an expert in every vertical. an auto, like you mentioned initially, an auto client is not going to collect a consumer loan client. A credit card agency is not adept at doing debt by your paper.

Adam Parks (10:15)
Sure.

Bob Picone (10:28)
Etc etc a DDA agency who works small balance isn't going to collect a $10,000 credit card or things of that nature so we have Agencies that specifically work small balance large balance credit card consumer loan auto student loan utility medical Etc etc so everybody's kind of pre-qualified you know

Not everybody today is a jack of all trades, master of none. Back in the day, you just throw all that paper out there and everybody just collected it. But today we try to be a little more specific. If you don't work debt buyer paper, we're not going to recommend you. If you don't work debt buyer paper, we're not going to bring you the first debt buying client because we're not going to let you cut your teeth on that and potentially fail with our client as well. So again, we have to make both sides of the

Adam Parks (10:57)
You

Bob Picone (11:21)
of the equation happy and everybody has to be happy and we have to be happy and you know it's gotta be done the up and up.

Adam Parks (11:30)
So when you think about balancing the two sides of the equation, how much of that is art and how much of that is science? Because I can see the mathematical pieces, like the check boxes of do you work this paper, do you work these balances and those things, but it goes so far beyond just the technical aspects of it and some of it's personality driven or based on other factors.

Bob Picone (11:42)
Right.

Adam Parks (11:53)
How would you consider the balance between the art and science of managing agency placements?

Bob Picone (11:59)
Yeah, you know, that's a that's a really great question to be honest with you. You know, we we have probably 30 agencies in our stable and those agencies again, they they they're not a jack of all trades. Some of them are specifically consumer loans. Some of them are specifically debt buyers, specifically auto medical credit card placements, things of that nature. We've been working with these folks long enough now. We know

where their expertise are. know where they succeed. It's not that we don't want to bring on any new agencies because occasionally you do have that person that comes to you and says, hey, we're looking for a smaller shop, specifically a debt buyer. A debt buyer is going to purchase paper. We're looking for a smaller shop, 20 people, something of that nature where we know our paper is not going to get lost in the sauce, so to speak. So when you have a larger agency, you can give them larger placements. When you have smaller

Bob Picone (12:55)
replacements with smaller debt buyers you want to make sure that they're going to the right place because That's a big part of their revenue. You know they're looking for the agency to collect X amount of dollars because they need that you know to make their numbers and the other side of coin is the agency realizes Hey, you know, we're 15 people We're gonna give you all the attention you need for this portfolio So I'm guessing it's part art part science, but you pretty much know, you know out of the gate who's going to

succeed with what vertical and whose, you know, don't put them in that position because it's not a good place for them.

Adam Parks (13:32)
And you know, from what I'm hearing, though, it also sounds like you're maybe not isolated on what we have portfolio A needs to go to one agency and that there may be some slicing and dicing. Let's talk a little bit about what some of those criteria might be that you would use to make that workflow decision of how to segment the portfolio to the various agencies.

Bob Picone (13:39)
Not yet, not at all.

Yeah, you know, a lot of it is driven by the person who owns the paper at this point in time, whether it's a credit grant or whether it's a debt buyer. They're going to tell you what they want. Recently, we have a new to the industry debt buyer who is owned by not new to the industry people. So they've been out there for a long time, but they've asked us to recommend three or four agencies to them. But they're looking for the guy who's less than 20 collectors. They're OK with the guy who's 10 collectors.

Bob Picone (14:19)
because they're the ones that are going to put the effort that they need against the file. They're not just going to do a digital solution. They're going to make phone calls as well as a digital solution. So if you're getting a smaller agency that's 10 to 15 FTE, you don't want to load them up because they're doing great. Because as soon as you load them up with too much paper, they're going to fail. And they're the type of agency that likes to grow one, two FTE at a time.

where when you have the larger folks, 100 FTE or more, 75 FTE or more, they're more prone to be able to take additional business. So it depends upon the type of paper, it depends upon the balance, it depends upon the age. Age has a lot to do with it as well. We have very late stage agencies, we have early stage agencies, we have BPO's in there, we have prime, seconds, thirds, fourths.

Everybody is kind of specific. So we have a few agencies for every level of placement and a few agencies for every verticals, every vertical as well. So we're going to just make sure that we put the right paper in front of the agency where they're going to succeed and in turn the credit grantor or debt buyer is going to succeed as well.

Adam Parks (15:34)
So when you're measuring the functionality or the value of an agency to a particular portfolio, how much stock do you put into the digital strategies versus those manual strategies? And just to kind of preface, right, there's been a massive growth in email and text messaging, but it does short of differences in strategy, the rails are somewhat the same and it's a little bit harder to stand out as an organization using.

a digital channel, especially if you're using an out of the box solution because everybody's out of the box solutions short of minor changes to the strategy remains the same. But how do you look at that where the phone is still the number one place to collect payments across the board?

Bob Picone (16:17)
Yeah, we have folks that are purely digital and maybe they take a couple of incoming calls. But when you have somebody who's looking for a very strong digital agency, we can point them in that direction. Generally, when it's just a digital agency, it's a little less commission rate than it is when you're paying people to sit there and dial on the phone.

You have people that saying, I want to put it out there for 14 days, for 30 days. I want to do a digital try. If that doesn't work, then we'll give it to the regular traditional collection agency. Who also does digital today? Just much more than just the digital end of it. Some of these folks that do digital have it down to such a science that could tell you what time you're prone to opening up your emails, what day of the week you're looking to make a payment, what time of day you're looking to make a payment.

Etc, etc. So those folks are great for the first out of the gate try. The credit grantor had the accounts. They're done with it. Let's give it to a digital agency for, again, 30 days. We'll do it at a reduced rate. We'll let them get the low-hanging fruit, so to speak. And then let's place it with a traditional collection agency. Who also does digital and email just because of the expense of a letter today? Sometimes you can do it via email. depends on everybody has a different opinion of.

You who could do it based on their attorneys and things of that nature. So you know the hardcore collection and of dialing the phone is very important because that also increases liquidation rate for the folks that couldn't get it on the digital and email side and you still have a lot of people and I'll be honest with you I'm one of them who still like to talk to somebody on the phone. I still think is a lot of value to speak with someone on the phone and a tendency is to probably make that payment.

Bob Picone (18:04)
you know, with somebody on the phone versus a digital. Although the digital piece people like us, they don't have to speak to anybody and they can just go in and make a payment. there's benefits to both ends. A strong digital agency and a strong calling traditional agency, both are important.

Adam Parks (18:16)

So it sounds to me like you're not just focused on one portfolio for one agency, but you're actually looking at the strategic workflow throughout the account life cycle. And so from what you were saying, you might start with a traditional agency and then move into digital for a period and then move back to a different type of traditional. And as you were talking about the, it's called the, the work history or the age of the portfolio being a primary factor or primary criteria in determining workflow.

that that all might tie in together. Talk to me a little bit about how that workflow is managed, or how you're kind of helping to manage that process, because it doesn't sound like it's a one-off transaction. Take this portfolio, give it to that agency, and now I'm done. It sounds like you're a little bit more involved than that. Help me understand the depth.

Bob Picone (19:09)
Yeah,

definitely. We're involved from A to Z, soup to nuts, so to speak, just because we say, Adam, we have a place for you to put your paper. It's XYZ agency. We don't just leave you with XYZ agency. We'd like to be involved in as much as both parties want us involved. We'd like to be involved in all performance calls. We'd like to know if they're succeeding.

Bob Picone (19:33)
uh, exceeding expectations if they're falling short, et cetera, et cetera. We get involved. We will talk to the agency if they're not performing where they should be. Hey, what can we do to fix this? Again, we have to make both parties happy. So, um, you know, the agency has to make money. The debt buyer credit grantor has to make money as well. They have to have performance. So we're involved every step of the way. And if we see that, you know, the agency is a little slow on liquidation rate, you know, we'll have a conversation with them.

as well as the credit grantor will have a conversation with them as well. Or if they're succeeding, which happens quite frequently, we're going to want to talk to the credit grantor about, how about some more business for them or how about a different line for them? You know, they don't just collect this, they're, you know, they're proficient at a different vertical as well. So we like to put, you know, we like to put the agency together with the credit grantor, we're going to exceed expectations and

is beneficial for all parties. And again, remember, we're in the middle, so we have to make both sides happy. And if the agency doesn't succeed, maybe because they're just not succeeding because it's the right paper for them, but they just can't get it, that's going to jeopardize us recommending them again. Because we don't want to give anybody, we don't want to recommend to a credit grant or an agency, and then the agency doesn't succeed, doesn't get the liquidation rates they need.

Bob Picone (20:55)
because they're not going to want to come back to us either. And, you know, as buttoned up as we are, as much effort we put into an agency and as much effort we put into a credit grant or doing all the due diligence and security and everything else, it's a lot of time and a lot of money for us. And we want to make sure that both parties can succeed.

Adam Parks (21:13)
I think that's a incredible approach that long term management is a really difficult thing to participate in and to try and manage both sides of the equation. But you probably are able to avoid a lot of misunderstandings or additional issues through that involvement because you're able to communicate openly and honestly with both sides with less emotion attached to those discussions. Is that been the case?

Bob Picone (21:38)
Very very fair you know listen. We're all on this for the same thing everybody has to make money I mean none of us are any different What you do what we do what the agency does everybody has to make money make a living so you know we need to make sure that They're both making money. They're both doing exactly what they need to do You know I can probably say in my time with connect one which is you know since 2017 we've only eliminated a handful of

collection agencies that we won't work with anymore. It could be, it's mainly performance driven because if we don't feel like you're giving the performance, we don't want to recommend you very, there might be one or two that decided they didn't want to spend the money on licensing and all the most, I would say the majority of our clients are all national credit grantors and debt buyers. So they want, they don't want to segment by state. They want to place.

their entire portfolio out where it can be worked by one agency that's nationally licensed that has it all together. if an agency chooses, hey, we just can't afford to be licensed everywhere because you're a smaller agency or what have you, we understand that part, but we can't use you. We need to make sure that you have everything that we can put in front of one of our credit grants.

Adam Parks (22:53)
And what advice would you have for an agency that wants to get involved with a concierge service like a connect one, right? Like what are kind of those first steps or what advice would you have for them in approaching you for that type of opportunity?

Bob Picone (23:07)
Yeah, make sure you're buttoned up. mean, listen, we'll listen to anybody that wants to come to us. And we listen to quite a few people every week, whether they're a prime, second, a third, a fourth, very late stage, out of stat for that matter, too. We have a couple of agencies that are very, very good at what they do and out of stat and never generate a complaint ever.

You know, if you're the guy who is completely licensed, if you're willing to give it a shot, and remember, you're not going to make money out of the gate with every client. So you got to be able to hang in there for a little while. So we also review your financials. You know, if you're, if you're teetering on, you know, profitability and you're teetering on, know, making payroll every week, you know, we're, we still like you, but we can't deal with you because we have to make sure that, you know,

Adam Parks (23:38)
⁓ Okay.

Bob Picone (23:51)
Again, the right person is put in front of the credit grant or the debt buyer, know, the place to work. you know, if you're fully licensed, fully insured, you have security in place, you fill out our questionnaire, our security document, we're more than happy to talk to you. But again, you know, no hard feelings. But if you don't check all the boxes, we just we just can't work with you. You know, when I started this business, everything was done with a handshake and a pastrami sandwich.

Bob Picone (24:18)
And ⁓ it's a lot different today than it used to be. you know, back then it used to be just collect money. We don't care about compliance. We don't care about anything of that nature. You know, complaints, you know, my boss used to walk in when I worked for Citibank, he used to walk in the agency, slam the desk and say, you're not getting enough complaints. If you're not getting enough complaints, you're not trying hard enough. Well, that's, you know, that's gone full circle to where we are today where we don't want any complaints. know, compliance is first.

Adam Parks (24:18)
You

Bob Picone (24:47)
And where we go from there is secondary, but compliance is absolutely first.

Adam Parks (24:53)
Well, for any advice for creditors that want to take advantage of this opportunity to find the right service providers while minimizing their risk, because it sounds like you're going out and handling a lot of this due diligence upfront. know these people, not only do know these people, but you know these agencies for years and years, both in your past life and through the transactions that you've been doing since you've joined and started Connect1.

But what advice do you have from the creditor's perspective for those that are struggling to manage agency placements internally?

Bob Picone (25:26)
Yeah, you know, mean, we're a great alternative. do all, you know, other than the system programming on your side, we do all the work for you. We do the security assessment. We do the questionnaire. We do the licensing. We do the insurance. We follow up on everything. Now, again, in my opinion or my experience, all the credit grantors are still going to take your security package that you supply them for an agency, and they're still going to put their own out there.

Now we have the majority of everything covered, but everybody's different. And you know, over the years, if we had 10 credit grantors come to us with 10 different security questionnaires, we tried to mill them together and put that into ours thinking, hey, you know what? We just got A, D, and E, and we just put that in our security questionnaire. And then, you know, we think we have it covered and somebody comes up with, know, X, Y, and Z, and it just keeps on going. But we will do the majority of work for you. We will.

Bob Picone (26:25)
We will do the assessment on the agency. Now I understand the bank's gonna say we wanna come out there and see the agency, but what we're doing is we're giving you options, agency options, and where we've done the background work, where instead of going out to see Adam Parks, where maybe he is not compliant, we say here's Adam Parks' package, take a look at it, he is completely compliant, and if you go out there, you're not wasting your time, you're not wasting your money.

Bob Picone (26:51)
We've done all the background work for you. And we do a lot of special projects. We do a lot of one-off type projects, a lot of forward flow work. again, we know the folks that are going to succeed. We know the folks we're going to recommend to you are in that wheelhouse. We're not going to give you a medical agency to collect on your utility paper. Just us.

Adam Parks (27:10)
True statement, Bob, true statement. So as we wrap up our time together for today, any final advice for the audience?

Bob Picone (27:17)
Final advice, you know, we are a consultant that doesn't charge the credit grantor, the debt buyer to place paper. We get paid by the end user. So by all means, you can use us. If our folks don't succeed, you know, we basically don't make any money. You're not going to make any money. kind of in the same boat. We need to make sure the agency makes money so we get paid so the credit grantor is happy. But we do all the legwork for you.

We're more than happy to have a conversation with you, whether you use us or not. You don't have to use us. We're not charging you to have a conversation. But by all means, we may have that solution that you don't know that's out there because this is what we do all day long where the poor folks in the credit granting side, they're stretched thin. mean, they're wearing multiple hats and so forth. We wear the multiple hats too, but we have the due diligence completed in advance. So by all means, give us a call, talk to us.

We're always there. We're always willing to take the call. We'll always call you back and we're happy to work with you and we look forward to working with you and you know use us, you know 39 years experience for me 35 plus for my partner 20 plus for Lisa. So, you know, we have a lot of experience at connect one and we're more than happy to share

Adam Parks (28:35)
Well, I really do appreciate you coming on and sharing your insights. It's been my experience through the years with an opportunity to work with your team that everything that you're saying is right on point. And I really do appreciate you coming on and sharing your insights today with our audience.

Bob Picone (28:47)
And I appreciate the time, Adam. Hope you have a great day.

Adam Parks (28:50)
So for those of that are watching, you have additional questions you'd like to ask Bob or myself, you can leave those in the comments on LinkedIn and YouTube and we'll be responding to those. Or if you have additional topics you'd like to see us discuss, questions you'd like to ask, you can leave those in the comments below as well. And I bet you I can get Bob to come back at least one more time to help me continue to create great content for a great industry. But until next time, Bob, thank you so much for your insights.

Bob Picone (29:09)
Look forward to it.

Thanks, Adam. Look forward to speaking again.

Adam Parks (29:14)
Absolutely. And thank you everybody for your time and attention today. We appreciate you watching and we'll see you all again soon. Bye.