The History of Debt Collection, Part 1

According to anthropologist David Graeber, debt has involved some sort of institution throughout history. Whether it was the Mesopotamian kingship or Canon Law, some type of established authority controlled debt and ensured that there were social consequences for not paying.

As long as there has been currency, people have been borrowing and lending it. The beginnings of debt collection history involved enforced punishments upon those who were unable to pay their debts, and debts have even been paid with life itself.

If you look at the big picture, debt collectors and agencies are relatively new entities. Before their inception, it was the sole responsibility of the creditor to collect on the debt, and the law was typically on their side. In the past, many religious organizations discouraged their followers from lending and creditors from charging interest. Creditors could take consumers to court, and if they were found guilty, the consumers could be sent to debtors’ prison until his or her family could pay their debt in full. Collateral associated with the debt was a popular form of repayment (and still is in regards to car loans or home mortgages), and personal property was a popular consolation for creditors.


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Debtors’ prisons were abolished by the federal government in 1833. The image above is from a debtors’ prison in Accomack County, Virginia, where it was not outlawed until 1849.


Indentured servitude was a common form of debt repayment, even in early America. Debtors worked off their debts with unpaid labor for their creditor, and their service sometimes lasted years. This coupled with the tense early history of bank-based lending led to the negative reputations of both lenders and collectors. In this series, we will explore in more depth the historical timeline that led to today’s collections environment.

Corporate Social Responsibility: Atkins & Ogle in the Community

According to an article by Entrepreneur.com, companies that encourage community involvement distinguish themselves from their competitors and reap the benefits of loyal customers and happier employees. In 2013, Cone Communications and Echo Research reported a study in which they found that 82 percent of American consumers consider corporate social responsibility when deciding which products or services they want to buy.

At Atkins & Ogle Law Offices, LC, social responsibility is part of the fabric of our company not because of our business structure, but because of the type of employees the community provides. Our employees are top notch in their skills and responsibilities, but they are also dedicated to making the Putnam County and surrounding areas a better place.

In the past, Atkins & Ogle has financially supported many sports teams and extracurricular activities in Putnam County. These donations of both time and money include buying advertisements in team programs and yearbooks, sponsoring local t-ball teams and putting together a course on the collections’ process for the Law Explorers, a high school student group run by a local judge.

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Managing attorneys Jamie Atkins and Bree Ogle are both currently serving as baseball coaches in the community, and Atkins is the sitting president of the Putnam County Bar Association, which does a lot of behind-the-scenes work for the good of the county, including fundraising for ALS research.

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Atkins & Ogle also provides the opportunity for Putnam County seniors interested in a career in law to complete a work-based experience at the office for a credit toward graduation. Participants gain experiences attending court hearings, listening in on important phone calls and working in an office setting. AO also hires many high school students for part-time, after school positions.

By extension, our employees better the reputation of AO by being involved in other aspects of the community, such as local churches, Putnam County 4-H, career days, planning and executing charitable 5 and 10ks and serving as coaches for wrestling and cheerleading teams. In essence, our employees leave their 9 to 5 job and give of their additional time and resources to make their communities a better place.

While the resonance of community involvement is hard to measure, the second and third degree effects of corporate social responsibility are clear. Doing quality work for our clients while never losing sight of our community responsibilities consistently result in Atkins & Ogle attracting quality employees and upholding a positive reputation in and around the state of West Virginia.

Inheriting Debt: How Debt Can Affect Children, Spouses and Cosigners After a Death

Frustrated Man Worries About Economy, Unpaid Bills and Retiremen

Debt is a promise to pay back a specific amount of money in a specified manner. Unfortunately, the nature of debt means that it does not take a backseat when tragedy strikes.

Many people are unaware of how their debts may affect their loved ones, so here we have broken down who, when and why someone may inherit your debt.

Children

When a parent passes away, children are often left to wade through possessions, property sales and financial baggage.

Outstanding balances can be daunting to family members—especially if they were unaware the debts existed. Fortunately, most debts die with the individual. However, there are a few exceptions. When someone dies, the executor of their will is responsible for using their assets to pay as many debts as possible. These payments have to be made in a specific order: secured debts, unsecured debts and inheritances defined in the will.

Secured debts: A secured debt has physical collateral attached that guarantees the balance will be paid to the creditor, such as a car or home. If the deceased has not paid off their car or mortgage, these items may be repossessed.

*Note: The heirs of an estate may decide to use the estate to pay off a home mortgage and take possession of the home or take over the mortgage payments themselves. They may also choose to refinance and sell the house in order to pay off the remaining amount.

Unsecured debts: Unsecured debts do not have physical collateral attached, like credit card debt or medical bills. While family members are not legally bound to pay these debts, the executor may be required to use part (or all) of the inheritance money to pay off the remaining amounts. If the estate is not worth enough to pay off the balances, the money is divided between the creditors (if there are multiples) and the remaining balance is written off as a loss.

*Note: Federal student loans are forgiven when someone dies, but a personal student loan is considered an unsecured debt.

Inheritances: After all the debts have been settled, the remaining estate is used as inheritance as it’s defined in the will.

Spouse

Joint account holders whose income and credit history are used to get a joint loan or credit card will be held responsible for shared debts.

Creditors and guarantors

When someone becomes a cosigner or guarantor for another, they assume full financial responsibility for money owed. Cosigners are responsible for paying the full amount on a credit card, rent, etc. even when the original signer passes away.

Creditors usually have a fixed period of time to make claims against an estate. Typically between two and six months, if a claim in not made in the allotted time, it will be counted as a loss to the creditor.

*Note: Cosigners and guarantors are also responsible for the full amount of a debt of the original signer declares bankruptcy.

With this information in mind, getting your affairs in order (at any age) is very important. Debt may be farther reaching than you originally thought, so while it may be uncomfortable, talk with elderly parents about the state of their affairs and put serious consideration in before becoming a cosigner for someone—even a loved one. Being educated and prepared will help you bettered categorize and understand the responsibilities of those left behind.

Work Smarter, Not Harder: Lean Six Sigma

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As we’ve discussed over the past few weeks, timing is everything in the debt collection industry. A great way to use time efficiently is by optimizing processes and making procedures run as smoothly as possible.

Lean Six Sigma and the Continuous Process Improvement approach are a common set of industry-proven tools that are applied throughout most organizations. Applying these tools to the practice of debt collection is invaluable.

The approach includes constantly evaluating your processes in an effort to improve them. This is done with a focus on both the big picture (how it impacts the business overall) as well as the individual team member (the whole is only as great as the sum of its parts).

The big picture starts with understanding the overall vision of where you’re trying to take your practice. This includes ensuring your organization is able to accomplish its goals with its current resources and that the process has the support, or “buy-in,” at all levels. The goal at the team member level is to consistently train and educate, which will ensure that each member’s role is being executed and fulfilled at the highest level of performance possible.

Think of the actions of debt collection as an assembly line process.  A case is received and begins to go through the collection process. Typically that process will include evaluating and inputting information into the system you use, followed by pre-litigation, litigation, execution and with any luck, payment in full followed by a recorded release of judgment.

What must be evaluated throughout the entire process is three-fold: How long did this process take? How efficiently, and to what level of quality, was it performed? What was the cost and was it as cost-efficient as is reasonable?

This is where Lean Six Sigma comes in.

You can take the name quite literally—applying this approach to any business means trimming the fat (or the unnecessary steps) from your business process. The “lean” aspect focuses on efficiency. It takes a systematic approach to identify and eliminate waste (whether measured in time, effort or money) in the overall process. This is all evaluated with an overall goal of achieving perfection in the process, which brings us to the “Six Sigma” aspect of the approach.

Six Sigma is a methodology used to manage process variations in order to eliminate waste or defects with a goal of delivering the highest possible performance. In collections, our focus is providing the client with results as quickly as possible while also maintaining an emphasis on managing and minimizing risk.  Achieving our goals will ultimately improve both customer and employee satisfaction.

Executing a Continuous Process Improvement project must focus on one piece of the process at a time. That piece may be client satisfaction, operating concerns, improvement ideas, etc. and must always be tied to the overall goals/vision of the organization. To determine opportunity for improvement, you should ask several questions.

What is the problem or improvement opportunity?

Where does the problem exist (internally or externally?)

How long has it been a problem?

What is the extent of the problem and what is the impact?

Once you have identified and analyzed the problem, put it through the Continuous Process Improvement cycle, and implemented change, you must test your results. Remember to get the employees involved in the process. Resistance to change is a normal reaction; however, involving all parties in the decision for change and having them be a part of formulating the required change will instill a sense of ownership and a stake in seeing the change(s) achieve success.

While these approaches are meant to make your businesses more efficient and result in a more profitable process, you may run into mixed emotions from your team. Some will see the glass half full, believing everything is working just fine. Others will see the glass half empty, with a “this is how we’ve only done it” mentality. But with team empowerment and an environment that fosters patience in working toward a common goal, you may end the process with a common mindset that the glass is neither half empty nor half full—you were just using the wrong sized glass.

Hello World

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Welcome!

If you are searching the Internet looking for ways to avoid paying your bills – you’ve come to the wrong place.  You can find blogs on how to avoid debt and debt collectors as well as attorneys offering those types of services in every corner of our e-world.

This blog is for the rest of you—those corporations or individuals that have extended credit and have not yet been repaid.  Atkins & Ogle has been helping large companies, small businesses and individuals collect their debts for over 30 years.

Our blog will discuss your rights and obligations as a creditor, the types of services you should expect from an established debt collection law firm and what are considered the “best practices” in today’s industry.

Look forward to answers to questions such as,

Should your law firm charge by the hour or take a commission?

How much communication should you expect from your law firm? 

Where is the line drawn between having a reasonable request and expecting too much?

These questions, as well as yours, will be addressed.

Do you have questions or suggestions for a topic to discuss? Send them to jatkins@atkinsoglelaw.com, subject: blog.