Flat Fee Rates for Cheaper Collections

Fidelity Information Corporation, a nationwide collection agency, has an ASP-style website that allows small business to send collection letters for a flat fee.

by Alex Goldman ISP-Planet Associate Editor [July 11, 2003]

Fidelity Information Corporation has a website, olddebts.com, that has been in operation for several years. We ask Jeff Cronrod, president of Pacific Palisades, Calif.-based Fidelity, "Why would someone pay you to send a letter for them when they can take them off your website?" Sample letters are here.

"People pay for a letter from a collection agency (which is cheaper than a letter from an attorney, but similar) to notify a debtor that they're taking this to another level and could ruin their credit," replies Cronrod.

The site has no secrets. It posts samples of the letters that customers buy, and it even posts the prices (although there are volume discounts, as shown). Each "package" listed is usually several letters (often four of them). For four letters, $17.95 (full price for four letters plus change of address if necessary) seems reasonable. The price includes printing, mailing, and return envelope.

A key part of delivering this price is negotiating well with Internet-connected printers. Cronrod explains, "We use large laser printing companies. There are about a dozen we could use, and we have contracts with about three at any time. We send them our data at midnight every night. That's 700 letters on a slow day and 4,000 letters on a good day. They laser print the letters on an 8 ½" x 11" paper with a perforated stub and mail them."

Customers vary widely in size. "We have large national and even international customers. We have small users including a gardener and a Web design firm. Some customers have one problem every 3 months. They're spending $17 every three months, but we're there for them. Others will do two or three thousand in one day."

Cronrod is very satisfied with the ASP model of doing business. "A friend said to me, 'Jeff, it's a 24 hour a day, 7 day a week vending machine.' As soon as he said that," Cronrod jokes, "I put down my fork, which I don't do very often. We were doing tenant screening via fax and I realized we could do a lot more on the Internet."

Building the ASP cost about a quarter of a million dollars, and involved hiring a small, dedicated team with two programmers and a graphic designer at its core. "We built the apps from scratch," says Cronrod, proudly.

The site, now four years old, is undergoing "about its eighth revision." The toughest part of designing the site was interfacing with credit bureaus (Equifax, Experian, and TransUnion) and with the printers, because the programmers had no experience working with the proprietary and antiquated systems at the other end. The team also created a simple user interface that can be viewed in the website's demo.

Cronrod feels that xSPs and other tech businesses will warm to the website. "There's almost no industry that cannot use us (except landlords). The biggest obstacle to adoption is that it's only good for people who are Internet savvy, so we feel it would be good to look for people who are savvy because they're in the tech business."

Fidelity, the parent company, is based in California but also has offices in Florida and Ohio. Notes Cronrod, "the Internet has allowed us to not open as many offices as we might have had to."

In three states, it is particularly difficult to collect on debts. The "debtor-friendly" states are Texas, Wyoming, and Florida. Cronrod notes that many debtors, some of them notorious, move to Florida to be able to keep what they own.

It's unusual to be a national collections agency. "Most are small or are mom and pop operations," notes Cronrod. 33 states require "some form of licensing and bonding," he notes, but the rest don't. The state-by-state differences in collections law mean Fidelity has a full time compliance attorney whose job is to keep track of legal changes throughout the USA.

Fidelity, the offline business, does more than just collections. It does tenant screening for landlords, employment screening, and criminal screening for the public. Even the offline business, however, has taken advantage of the printing infrastructure created for olddebts.com. Cronrod says that the online business (and its advertising, which is mostly pay-per-click advertising on search engines) has brought the company customers. "And sometimes, a company will pay for a simple letter and get 30 of 100 debts paid. Then they'll refer the rest to the offline company."

For small businesses, especially those who are tech savvy, Cronrod says the website is ideal. "It's the Internet. It's very convenient. The store's always open."

— End