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VSDA's 'Common Practices' Study on Debt Collection Says Retailers May Be Leaving Money on the Table

30 Jul, 2001 By: Hive News

The fourth monthly Video Software Dealers Association (VSDA) “Common Practice” member survey on the debt- collection practices of video retailers reveals that retailers may be leaving revenues on the table.

“In addition to this survey, the 2000 VSDA Benchmarking Study found that retailers' reported income from extended rental fees (late fees) varied greatly, with the more profitable retailers collecting, on average, $10,000 more per year in ‘extended rental fees,'” said Mark Fisher, VSDA's v.p. of membership. “Both studies indicate an opportunity for some of our members to increase their revenue and profits by establishing better policies and procedures for debt collection. Hopefully these studies may help some retailers hone their policies and practices.”

Some of the common practices identified by the retailer survey are:

-- Most retailers appear to be carrying almost $100,000 on their books for unpaid extended rental fees, which have accumulated over an average of seven years, or an average of just over $14,000 each year.

-- Only 2% of participating retailers believe they'll collect 98% of their extended rental fee debt. Most believe that they will never collect more than 5%. This means that the average retailer will eventually be writing off $95,000 due to uncollected extended rental fees that have not been collected.

-- The average participating retailer loses an average of just over six tapes per month due to customers not returning tapes.

-- Most retailers do not charge their customers' credit cards for both unpaid extended rental fees and for unreturned tapes. More retailers invoke this practice for unreturned tapes than for extended fees.

-- Most retailers handle the decision to allow a customer who owes extended rental fees based on each individual situation, sometimes allowing the customer to rent and sometimes not.

-- Almost all retailers (94%) reported that they are willing to negotiate or discount a customer's extended rental fees.

-- Most retailers don't expect to collect more than 10% of the debts that are sent to a collection agency.

-- In general, there is apparent displeasure with support from both law enforcement agencies and the courts, although the courts scored significantly lower.

A copy of the full results from VSDA's latest common practices study is available free to members, and can be accessed online at www.vsda.org. Those members without online access can request a copy of the report by mail or fax. A synopsis of each report will also be published in the monthly VSDA Video Voice newsletter.

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