Debt Collection Law Ranks High in Safety and Security

Debt collection law gets a bad rep. Just Google “debt collection,” and you’ll stumble across a thousand stories about crooked collectors, deceptive ruses and stringent regulations to maintain the climate of lending, borrowing and repayment.

If you’ve been following our blog, you likely already know that debt collectors must follow specific federal guidelines to avoid violating consumer rights and maintain their own responsibilities. Well-known laws that we’ve discussed include the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and the Gramm-Leach-Bliley Act (GLBA).

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However, what you might not know is that in the entire field of law, the legal debt collection industry is in the top 10 percent for IT security, data security, physical security and third party vendor management.

Because of the nature of the practice, collections tops all other areas of law in disaster preparedness, disaster recovery plans and employee training and conduct.

The industry as a whole is more likely to have superior call recording capabilities that record 100 percent of incoming and outgoing calls, email encryption and email programs that recognize and restrict the sending of a 16-digit sequential number (ie—credit card numbers).

The licensed and recognized creditors bar is the least likely to be hacked among all law firms nationwide, and although there have been attempted website hacks, there are no known data breaches in the entire industry of legal collections.

While the stringent standards placed on collectors are to protect the consumers, they make the practice of debt collection very expensive. Collectors rank high in the areas of safety and security, and that is a positive thing, but they pay handsomely to do so.

The bottom line after paying out for security systems and other third party vendors depends entirely on a collectors’ ability to connect with debtors and work toward a payment plan that benefits both parties.

Despite the horror stories, these statistics shine a positive light on the field of legal debt collection. Collectors are doing their best to ensure a safe and secure relationship with debtors, protect important and private information and collect money in order to regain economic balance in the area of lending.

Escaping Debt: Consumers Considering Moving Abroad

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Debt can be overwhelming. While most people don’t intend to enter into a debt that they cannot repay, life gets in the way, and things happen that are outside of our control.

For some with a very large debt, it may be tempting to escape it; some people even take extreme measures by moving to another state or country. Here we’ve broken down some of the most common questions about the collection of debts in the United States and abroad.

What happens to my debt when I move to another state?

Assuming you have been found liable for your debt and there is a valid “judgment” for it recorded in the state in which you live, the collections company will get a triple sealed authenticated copy of that judgment and mail it to a collections company in the new state. The company will file a new action called a filing for a foreign judgment. Even if you have not yet been found liable for your debt, these proceedings can occur at a later date, even after you have moved to another state.

What happens to my debt when I leave the country?

Debt remains outstanding until it is paid, and interest and penalties continue to accrue. While it is technically illegal for a creditor to sue you in a country or state in which you no longer reside, sometimes this issue rests on the language of the contract or the sentiment of the court. Most contracts and loan agreements specify in which states legal arguments and court cases must be settled.

If a lawsuit against you does go uncontested while you’re away, the collections process will continue as it would if you were stateside. Leaving the country can cause serious problems with your credit rating if you do decide to return. Creditors can begin the judgment process on your last known address (despite legality), and your debt will be waiting for you if and when you return.

If you still have assets in the country, the creditor can secure these as partial payment. You could return to a judgment against you or the repossession of your belongings. The IRS expects U.S. citizens to file tax returns and pay what is owed. If you leave the country with unpaid debts, eventually those balances will be written off and your creditor may file a 1099-C form with the IRS reporting these unpaid amounts as “income.” The IRS will expect payment of this phantom income.

Another consequence of leaving the country could be causing the burden of your debt to fall on your family or co-signer(s). In addition, a collector could sell your debt to an agency in another country, and foreign creditors can order a copy of your United States credit report.

Are contracts for debt enforceable outside of the United States?

Contracts for debt are not enforceable outside the United States. So essentially, it is true that leaving the country is a way to leave your debts behind. While foreign countries will not seek to extradite you for debt, there are other actions that may be taken.

Some debt collection agencies operate in multiple countries, expanding their reach. However, that is not typically the case. You may find that the country you’ve chosen has a reciprocal agreement when it comes to tracing debtors, like Germany, Canada and the UK. HM Revenue & Customs, the UK’s tax and customs authority, has a long reach. HM has a mutual assistance agreement with several countries to recover money owed.

While relocating may help you outrun your debt, it is not as simple as it sounds. Not only will you have to come up with the money to purchase a plane ticket, invest in housing and sustain yourself, but if you plan to stay in a foreign country for a long period of time, you will have to secure residency, which requires income. You have to prove that you have a reliable source of monthly income to meet the country’s minimum requirements.

Also, lenders are not as generous and quick to extend credit in other countries as they are in the United States. If you have become accustomed to using your credit card when money gets tight, building a new and better credit history elsewhere may prove difficult.

Spring Cleaning Tips for Your Small Business

While debt collection is certainly a niche industry, it still operates within the business realm. Especially when it comes to small businesses, keeping your environment, procedures and employees fresh and renewed is important to prevent becoming bogged down and burned out.

Since spring has arrived, why not take this opportunity to spring clean your office—and we don’t just mean finding hidden dust bunnies. Check out these spring cleaning tips for small businesses.

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  1. Clean up your web presence

There’s no doubt that Internet presence is more important than ever—no matter the industry. Your website should be user-friendly, clean and accessible. If you’re feeling good about your website, consider reaching out to potential clients or consumers in other ways, such as social media, blogging or advertisements.

Another refreshing way to clean up online is to encourage your employees to give their e-mail inboxes a good scrub. If you start every morning by logging into an inbox that is bombarded with unread, un-replied or old e-mails, it can really take a bite out of your productivity. Delete the old ones, sort the important ones into folders and try to respond as quickly and efficiently as possible so you don’t get behind.

  1. Offer praise

It is refreshing for your employees to hear about what they’ve accomplished so far this year. Since we’re almost at the halfway mark, consider having an office meeting or luncheon to discuss what your business has accomplished since the New Year and what you could be doing better. Taking time to recognize and appreciate your employees renews motivation.

  1. Clean up your processes

If your processes and procedures are outdated or need some revamping, what better time than spring to update? This is also a great time to make sure your company is taking advantage of any tools designed to increase efficiency in areas like banking, bookkeeping, recording, etc.

  1. Room for growth

You know what they say—April showers bring May flowers. Spring is all about growth, so this spring, consider assessing or reassessing whether your company needs to grow for improved performance. Maybe you’ve taken on more clients and need to hire more employees, or maybe you need to go out looking for those new clients. Either way, expansion is an exciting way to breathe new life into your company.

  1. Go green

Create a cleaner business environment by going paperless if possible. While some degree of paperwork is always necessary, try going digital where applicable. This is another area where online tools may come in handy!

Senate Bill No. 542 Important for WV Debt Collectors

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The West Virginia Consumers Credit and Protection Act (WVCCPA) was originally passed in 1974 as a measure against abusive and deceptive debt collection practices. It has since been amended several times, most recently in the 2015 first session of the 82nd West Virginia Legislature.

Senate Bill No. 542 is an amendment that made significant changes to several sections of the WVCCPA. The bill, which was signed into law by Governor Tomblin on March 31, will go into effect on June 12; however, certain provisions of the bill will not become applicable until September. The bill seems to focus on issues that are frequent claims litigated in West Virginia courts, such as how many phone calls per week constitutes a violation and appropriate times for communicating with consumers.

There are two major changes that will be particularly significant to day-to-day debt collection operations. The first is that the bill states that notifications of attorney representation must be made in writing (either on paper or electronically) and sent to either the West Virginia Secretary of State or the collector’s place of business.

Section 46A-2-128 formerly stated that collectors should cease communication with a consumer “whenever it appears” they are represented by an attorney. This was often ambiguous and could constitute anything from a brief phone call or voice mail to an e-mail. However, the amendment sets a more specific procedure and timeline and offers a 72 hour grace period after the collector receives the written notice from the consumer or his or her attorney. This will help collectors avoid unnecessary fines for violating the WVCCPA and federal standards.

For example, let’s say a collections firm or agency had an automated outgoing call set up to contact a consumer on Saturday morning, and the firm received notice that the consumer had obtained an attorney on Friday afternoon. In the past, if the automated call was not canceled, the firm would be fined for violating the consumer’s rights. However, with the recent amendment, the firm has 72 hours to comply after receiving the written notice.

In addition, Senate Bill No. 542 revised Section 46A-5-106, which previously allowed statutory penalties to be adjusted for inflation. Per the amendment, the penalty will be reset as of September 1, 2015. The new fixed penalty of $1,000 per violation will no longer be subject to the inflationary standards originally imposed in 1974; however, a new inflationary standard may be imposed after September 1. An across-the-board four-year statute of limitations will be imposed on WVCCPA penalties as well.

These changes signify a significant change in the nature of debt collection legislation. Up until this point, most regulations have been made with the objective of protecting consumers, but recent changes demonstrate a shift toward assisting the collections industry, which over time will benefit the state and its economy.

In the News 04/21/2015

The 2015 West Virginia legislative session saw significant changes for the debt collection industry. The WV Legislature passed Senate Bill No. 542, which amended several sections of the West Virginia Consumer Credit Protection Act (WVCCPA). The bill, which was signed into law by Governor Tomblin on March 31, made concessions regarding when and how often consumers can be contacted, how collectors must be notified when a consumer has obtained attorney representation and minimized the interest rate on collections’ penalties, which will be effective on September 1.

For more information, you can read the bill in its entirety here: https://legiscan.com/WV/text/SB542/2015.

Or check out our blog this Thursday for a breakdown of the WVCCPA amendments and how they will affect collections in the Mountain State.

In the News 03/03/2015

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In Tuesday’s post on Collecting Corporate Debts, we discussed the least sophisticated consumer standard. This week in the news, Attorney John Rossman expands on that concept on insideARM.com. This standard is an established tenet in FDCPA law, as it suggests that all debt collection communication must be approached this way.

However, many practitioners also recognize that the exception to this rule is collection communication with a consumer’s attorney. This has been debated in the past, but recently the 11th Circuit Court of Appeals stated that “statements in a proof of claim filed in a Chapter 13 Bankruptcy are subjected to the least-sophisticated consumer standard” in the Crawford decision.

While the Crawford decision is most widely known for its interpretation of the crossroads between bankruptcy law and the FDCPA, the implications regarding communications between consumers and attorneys are also notable. For more information, visit: http://tinyurl.com/mm6y2r6.

Collecting Corporate Debts, Part I

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Approximately 77 million Americans are in some form of debt. Most debt collection agencies and law firms focus a lot of their time, energy and resources on collecting these retail consumer debts. However, businesses and corporations can also default on loans and mortgages and purchase inventory they cannot afford.

For collectors, compelling a commercial debt can be significantly different than collecting an individual consumer debt (although many firms use the same processes). Depending on the corporate structure, using your tried and true policies and procedures may be the best course of action for continuity for your employees and records.

An important step in collecting a corporate debt is finding the right person to contact. For a small business, it’s usually the owner, but for a corporation or chain, it is typically someone in the accounts payable department. When a collector is researching the appropriate contact, he or she might find that there are actually two debtors: the named corporation and a personal guarantor, an individual who also signed their name to the purchase or contract.

Corporate debts are often easier to collect, and corporations are often more likely to pay than individual consumers. There are fewer restrictions on the collector and often, more money is involved.

However, depending on the size of the debt and the stability of the company, corporate debts also have a shorter life. While a personal debt can be pursued until the debtor passes away (and even then, certain debts are inherited by relatives) or the statute of limitations expires, if a company goes out of business, files bankruptcy or becomes defunct, time expires for the collector.

Over the course of this three part series, we will look at the unique differences and practices involved in the collection commercial debts. Be sure to check in next week for more information!

8 Ways to Recognize a Debt Collection Scam

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As we’ve discussed in previous posts, government agencies have been created and charged with overseeing and policing debt collection agencies and law firms due to illegal and unethical collection practices.

However, their responsibilities also extend to notorious debt collection scams, which have affected thousands of people and garnered millions of stolen dollars. When someone calls you imitating a collector, they may have already accessed your personal information through identity theft or by obtaining your credit report, but there will still be signs if the caller is a fraud.

Here we’ve listed a few ways to recognize a debt collection scam. Do not provide personal information if any of the following tactics are used:

  1. The caller uses fear or harassment to urge you to pay the debt. Licensed and trained debt collectors know that the use of abusive tactics is illegal and punishable under the Fair Debt Collection Practices Act (FDCPA). If the caller-in-question threatens you with an immediate lawsuit, a call to the police or possible arrest, they are most likely not a legitimate collector.
  1. The caller demands that you pay today or in the very near future, with no offer of a payment plan. Compassionate collection practices suggest that consumers be offered monthly payment plans if they are unable to pay their debt in a lump sum. A caller suggesting that you are required to pay your debt all at once is suspicious.
  1. The same person calls you multiple times or answers the phone every time you call. Most collections agencies have a variety of employees working on each case and a receptionist that transfers incoming calls to the appropriate extension. If you have been interacting with the same person during every phone call (both received and placed by you), ask to speak to someone else. If the caller refuses, you may be speaking with a debt collection scammer.
  1. They offer only one form of payment. Every collections firm and agency is interested primarily in collecting money; thus, they will typically accept a variety of payment options including personal checks, online payment with a debit or credit card, money orders or bank ACH. Scammers often encourage you to pay with a credit or debit card over the phone.
  1. They cannot provide an address. If you are suspicious of the caller, ask them to provide their mailing address for you to send a personal check. If they cannot provide you with basic information like an address or return phone number, hang up.
  1. The caller cannot answer basic questions or refers you to the original creditor with questions. Collections agencies and law firms are equipped with all of the necessary information in order to collect on your debt and are in regular contact with the original creditor. If the caller cannot provide you with basic information about the debt, such as the date of default, principle amount or interest rate or suggests you contact the original creditor with questions, he or she is likely being dishonest.
  1. You’ve never received written communication stating an attempt to collect on the debt. If this phone call is the first time you’ve ever been contacted about your debt, request a validation letter before speaking with the caller.
  1. The caller contacts you at inappropriate times or after you’ve requested collection attempts to stop. FDCPA regulations state specific times that collectors can contact you. If the calls come before 8:00 a.m., after 9:00 p.m. or while you are at work, do not answer. If you have submitted a written notice requesting no further contact about the alleged debt, communication efforts must be terminated immediately. Continued contact is considered abusive and deceptive under the FDCPA.

If you believe you are the victim of an attempted debt collection scam, contact the original creditor or report suspicious or fraudulent activity to the Federal Trade Commission.

Have you ever been the victim of a debt collection scam? Visit our Contact Us page to share your story.

It’s All About that Pace: Efficient Debt Collection Strategy

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In debt collection, as with most things in life, timing is everything.

The longer it takes for your team to act on a case or the longer you give a consumer to pay, the less likely it becomes that you will collect on that debt.

It’s important for you to collect as much on each case as possible for several reasons. Obviously you need to collect to satisfy your clients and show them that your team is skilled and competent, but many clients will send small batches of collections cases in order to assess a firm’s success before sending them more (and often bigger) cases. Your collection fees also pay your employees and keep your business up and running.

Here are a few ways to ensure that your cases are being processed, acted upon and collected on in a timely manner:

  1. Upload and process new cases ASAP. When you receive a new case from a client, upload the necessary information into your database and begin processing the case as soon as possible. Once the information is accessible, other members of your team will be able to do their part, such as making contact with the consumer via a demand letter or filing documents with the court.
  1. Consistently follow up with clients and debtors. This may require hiring additional personnel, but making legal, consistent contact with consumers is the best way to secure payment. Going long periods without making contact with a consumer will reduce the likelihood of receiving payment. Also, keeping your clients updated on their cases is a great way to build relationships and secure more work from them.
  1. Determine if there is intent to pay. If a consumer tells you up front they have no intention of paying their debt or you sense it during your conversations, take advantage of that knowledge and move to legal action in the most expeditious manner allowed.

If you are dealing with a bad debt, or a debt that cannot be recovered, don’t waste time or resources. Focusing on active, collectible cases will provide the most benefit to you and your client.

In the News 02/10/2015

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In 2014, 1,117,426 properties were reported as having foreclosure filings, default notices, scheduled auctions and bank repossessions. This number is down 18 percent from 2014 and 61 percent from the peak of foreclosure filings in 2010. The 2014 total is the lowest since 2006.

According to Daren Blomquist, Vice President at RealtyTrac, the foreclosure market is close to stabilizing to a historically normal level; however, a recent surge in foreclosures at the end of 2014 indicates that lenders are preparing for a “spring cleaning” in the first half of 2015 in some states. Read here for more information:

http://www.creditandcollectionnews.com/viewer.php?url=http%3A%2F%2Fwww.centralvalleybusinesstimes.com%2Fstories%2F001%2F%3FID%3D27554