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!
DriveTime Automotive Group, Inc. has recently been accused of debt collector harassment and agreed to an $8 million settlement to reconcile charges of violating the Fair Debt Collection Practices Act (FDCPA). The charges brought against the company after an investigation by the Consumer Financial Protection Bureau (CFPB) alleged that they lacked an adequate written policy for their bill collectors, which led to collector harassment, as well as inaccurate reporting of current balance information on accounts, timings of repossessions and dates of first delinquency.
The report issued stated that DriveTime, which has dealerships across the country, had only two employees assigned to handle up to 22,000 disputes each year. Accusations of calling consumers at work and after receiving cease contact requests were also included in the charges.
Read more here: http://www.lawyersandsettlements.com/articles/Bill-Collector-Harassment/debt-collector-lawsuit-bill-19-20461.html#.VOykQvnF__F
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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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:
- 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.
- 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.
- 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 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:
Debt collectors operate in a very sensitive environment. Those that make collections calls must know how to talk to people who may be at one of the toughest points of their lives. People who are in significant debt may suffer from related social issues such as unemployment, failed marriage or foreclosure on their home or property as well as mental and emotional repercussions, including depression.
While placing and returning phone calls to consumers, debt collectors must strike a balance between being compassionate about the debtor’s financial situations while also being firm in the execution of their duties to ultimately find ways to collect the debt. Collectors often find themselves on the receiving end of anger, screaming and cursing, during which they must be patient and maintain control of their own emotions.
Because of these conditions, not everyone is cut out to be in the collections business. Collections firms must be intentional and specific when hiring by seeking out those who will make the best collectors.
A recent debate on LinkedIn discussed whether or not personality or proper training techniques were responsible for the success of a debt collector. In his article on Collection Advisor, Dean Kaplan compiled a list of debt collector job descriptions from different firms, and it was no surprise that many of the desired qualities overlapped.
- Thick-skinned/Doesn’t take things personally
Don’t misunderstand us, possessing all of the right qualities does not negate the need for comprehensive training in negotiations, salesmanship, customer service and the firm’s policies. However, without these five attributes, collectors could cause more harm than good for the firm and the consumers.
What do you think? Are successful collectors born or trained? Feel free to weigh in in our comments section.
While debt collection law differs greatly from say, criminal defense, there is one component that should be at the center of every firm’s agenda—attorney/client relationships.
Lawrence G. Almelda, a shareholder at Brinks Gilson & Lione in Chicago, outlines four approaches to enhance client service practices for the American Bar Association in the following article:
Creating a personal and mutually beneficial attorney/client relationship has a multitude of benefits, including improving the bottom line. Almelda encourages exercising high responsiveness; making clients’ lives easier by providing a filtered-down version of legal information and summarizing when you can; following up often and—most importantly—making clients look great.
A successful collections call takes a lot of training and practice.
There are several rules and guidelines collectors are required to follow. Following those guidelines will still not help them predict the circumstances they’ll encounter while making their collections calls. During the course of their calls they will speak to a variety of individuals, ranging from polite to the disgruntled, and hear an assortment of personal stories of challenging financial situations.
Debt collectors sometimes have a bad reputation with the general public, due in large part to unprofessional, unethical practices. The illegal tactics of debt collectors are one of the many reasons why the Fair Debt Collection Practices Act (FDCPA) is so important. Consumers filed 45,050 complaints in the first six months of 2009 to the Federal Trade Commission (up 19 percent from that same period in 2008), making it even more important that collections professionals use ethical and compassionate practices. Here we’ve listed five of the top mistakes collectors make when contacting debtors.
- Not disclosing identity. Collectors are required under the FDCPA to identify themselves, notify the consumer that the communication is from a debt collector, give the name and address of the original creditor, notify the consumer of their right to dispute the debt and provide a verification of the debt.
- Failure to cease communication upon request. If a consumer submits a written notice that they wish to receive no further contact about the alleged debt, communication efforts must be terminated immediately. Continuing to contact a consumer is considered “abusive and deceptive” under the FDCPA. Collectors should also cease contact with a consumer who is represented by an attorney.
- Failing to Mirandize. The FDCPA requires that debt collection calls include a mini Miranda statement, which lets the debtor know that any communication (written or verbal) is at attempt to collect a debt and any information obtained during the communication will be used for that purpose.
- Misrepresentation, deceit or harassment. Pretending to be law enforcement or an attorney, bullying or threatening and using profanities are all prohibited under the FDCPA. While it is not necessarily considered harassment, compassionate collections practices teach collectors to avoid a bad attitude. Losing your temper (even if the debtor yells, curses or threatens the collector), being impatient and getting caught up in a consumer’s personal stories are all ways to derail a collections call.
- Revealing information to a third party. Part of a collections call script should be confirmation that you are speaking to the correct person. Identify the consumer by asking for their social security number, address and phone number. Discussing a debt with someone other than a debtor’s attorney or spouse is prohibited.
At Atkins & Ogle Law Offices, LC, we thoroughly train our collectors in collection law, compassionate collection and professionalism. Experience and hard work are a hallmark to our success and make our firm the most time-tested and progressive debt collection law firm in the state of West Virginia. We are guided by our values of service, honesty, integrity and proficiency. While we work to serve our clients with compassion, we also extend those sentiments to debtors.
A recent decline in lawsuits filed in federal court claiming violations of the Fair Debt Collection Practices Act (FDCPA) is a sharp contrast to the rise seen in 2008-2009. The number of cases in 2014 (9,720) was down 5.7 percent from 2013, making this the third straight year of decline.
Photo credit: Inside ARM
However, this decline may be attributed to the rise in cases involving the Telephone Consumer Protect Act (TCPA), which were up 25 percent in 2014. The increase in TCPA cases has left many accounts receivable management companies increasing their efforts in compliance.
Members of the credit card, mortgage, real estate, debt collection and telecommunication companies may find that the FDCPA has quantified more clearly what is and is not a violation, whereas the TCPA leaves more room for consumers to allege more vague claims prior to discovery. Read more here:
What are your thoughts on compliance regulations? What tools can ARM companies use to increase their compliance standards? What does the TCPA offer Consumers that the FDCPA does not?
The Consumer Financial Protection Bureau (CFPB) is a government-created agency that was created in 2011 and has since been working to regulate and enforce consumer financial protection laws. This agency has taken on major industries, such as credit card companies, mortgage, real estate settlements, debt collection and now—telecommunication.
The CFPB has recently filed an action against Sprint, which has many asking whether this bureau will now be extending its reach into other types of industries. While previously relevant industries sold “consumer financial products and service,” telecom companies simply charge consumers for services. Read more here:
What are your thoughts? Are the parameters of this action within the intent of the Dodd-Frank Act?