Kleid Co.'s Demise Spurs Suggestion
In my 38 years in the business, I've been through three instances in which a list broker either filed for bankruptcy or disappeared before forwarding our payments to the list owner or manager. In each case, the timing of the bankruptcy was in the first quarter of the year, when receivables from our traditionally largest mailing period were in hand.
As mailers who already had paid the broker's invoice before bankruptcy, we had no obligation outside of demonstrating proof of payment. Nevertheless, we were sensitive to the list owners' plight as even though the broker was acting as their agent, we chose to rent the list through the failed broker. Furthermore, it was essential that we maintain a good relationship with the list owners for continued access to their lists.
After the last major list broker bankruptcy in 1993, we developed a simple one-page broker's agreement that we insisted the broker sign before placing any future list orders. In essence, it stated that the broker was acting as the list owner's agent, was acting as a fiduciary and that the rental payments we forwarded would be forwarded to the list owner (less commission) within a specified time.
We weren't asking the broker to guarantee the list rental, only to guarantee that our payments would be forwarded. The brokers weren't too happy about signing it, but eventually they fell in line. After all, all it stated was that they would do what they're supposed to do.
It seemed to me that the personal guarantee would motivate the broker to act more like a fiduciary, even when times got tough. If anyone would like a copy of the agreement, drop me a note with your fax number.
495 Post Road East
Westport, CT 06880