Understanding Fair Debt Collection

The words debt collection bring a lot of panic and anxiety to individuals who are in debt. It may be your student loans, your mortgage on your house or your car payments. No matter what the debt may be, debt collection is something…

The words debt collection bring a lot of panic and anxiety to individuals who are in debt. It may be your student loans, your mortgage on your house or your car payments. No matter what the debt may be, debt collection is something that every debtor has to face. After all, your creditors and lenders need to get their money back.

So when you answer your phone and you encounter the representative of a debt collection agency, don’t panic. Remember that debt collection is an activity that is regulated by the law. The law ensures that debt collection is just an act to pursue you to make payments; it will not impede on your rights. The Fair Debt Collection Practices Act of 1977 details the rights that you have when it comes to debt collection.

Understanding Debt Collection

If you owe a certain amount of debt to a company, you usually pay the debt according to the contract that you signed. However, if you miss payments or you refuse to stick to the payment plan, the company may turn the debt over to a collection agency– this can also happen if you continually ignore notices from your lender. Simply put, debt collection happens when your creditor or lender feels that pursuing you for payments is already taking up too much of their resources.

Of course, the debt collector cannot simply pop up on your doorstep, demanding that you pay your debt. Typically, debt collection starts when a collector contacts you and notifies you of the status of your debt. The initial contact can happen through a lot of ways. It can be done through a letter, a fax, an email, or a typical phone call. In some cases, the debt collection process can start with a home visit from the collector. However, do not panic. The first visit is usually for the purpose of gathering information only. The debt collector simply wants you to know that he will be handling your payments.

Debt collection is a very transparent process. You will be given all the information you need. For instance, within five days of initial contact, the collector will send you a written document that will provide the necessary details regarding your debt. It will include the name of the creditor or the business from which you borrowed the money. Also included is the specific amount that you have yet to pay.

However, it is important to note that debt collection activities are not always 100% accurate. Sometimes, businesses may fail to update their records assuming that you have missed some payments. If you believe that you have sufficiently settled your debt, you can just write a letter to the collector to explain yourself. You must show proof that you have settled the account, and until the collector can dispute your claim, all debt collection activities will stop.

Do you have questions regarding debt collection?

Call the Stevens-Lloyd Group today.

The Importance of Understanding the Debt Collection Statute of Limitations

Debt collection is covered by the statute of limitations. The statute of limitations refers to the law that sets a deadline for law suits. For every type of case, the law sets the timeframe in which debt collection agencies can legally attempt to collect…

Debt collection is covered by the statute of limitations. The statute of limitations refers to the law that sets a deadline for law suits. For every type of case, the law sets the timeframe in which debt collection agencies can legally attempt to collect on that debt , including filing lawsuits against the debtor.

Normally, the debt collection statute of limitations begins to run the date the contract is “breached” “or broken.” In reference to debt collection, after the designated statute of limitation expires, a debt collector can no longer collect on the debt. So it is imperative you hand the debt over to a collection agency to begin the process before the debt collection statute of limitations expires.

The debt collection statute of limitations is computed according to the last time your client made a payment to the outstanding debt. In most states, 180 days(Six months) will be added to the date the last payment was received. From that point, the debt collector will then add the number of years of the statute of limitations according two things: the state where the debt was incurred and the type of agreement that was entered into for said debt

For example: let’s assume the debt was an open-ended account in Tucson, AZ. The last payment received was May 15, 2016. 180 days is added to the date bring the date to November 11, 2016. From that point, six years will be added to the November 11, 2016 date. Making the date that the debt collection statute of limitations expires November 11, 2022. All debt collection activities must cease upon that date since the debt collector can no longer use legal action to force the debtor to pay.

This is why Knowing the debt collection statute of limitations in your area is so very important. With this information, you can know the situation of your account and how it affects the chances of you being able to recover your outstanding receivables and/or debts

To determine the statute of limitations on your debt, it is important to know what kind of debt you have.

Open-Ended Accounts – According to the Truth in Lending Act, an open ended account is a type of credit plan that has repeated transactions and interests and balances that vary from time to time. Credit cards belong to this classification.

Oral Contract – This is a contract where you verbally guarantee someone that you will pay the debt you owe him

Written Contract – A debt where the creditor and debtor sign an agreement that details the terms of payment as well as fines and penalties

Promissory Note – This involves a written document where the debtor agrees to pay the debt according to a specific schedule of payments. The debtor also agrees on the applicable interest rates.

Remember, even if the account is only a month (or a even day) away from the expiration of the statute of limitations, you can reset the the six months and six years statute timeframe expiration date if your client/customer pays just a single dollar towards the outstanding debt resetting the six months and six years statute timeframe for any possible law suits.

Remember, even if the account is only a month (or a even day) away from the expiration of the statute of limitations, you can reset the the six months and six years statute timeframe expiration date if your client/customer pays just a single dollar towards the outstanding debt resetting the six months and six years statute timeframe for any possible law suits.

For a complete lis of the Debt Collection Statute of Limitations by state visit:
https://www.bankrate.com/finance/credit-cards/state-statutes-of-limitations-for-old-debts-1.aspx

Commercial Collection Agency – 5 Things to Consider when hiring one

While there definitely are ways to avoid using a commercial collection agency, sometimes you have no choice. Running your business is what you excel at, after all, and dealing with recovering outstanding debts and delinquent accounts can consume your patience, time and resources. Calling in the professionals…

While there definitely are ways to avoid using a commercial collection agency, sometimes you have no choice. Running your business is what you excel at, after all, and dealing with recovering outstanding debts and delinquent accounts can consume your patience, time and resources. Calling in the professionals is often the best choice.

When looking for a commercial collection agency, it͛s important to remember that not all agencies are created equal, nor are they the right choice for your particular business. Here are 5 things to consider when choosing a commercial collection agency to partner with.

Commercial Collection Agency – 5 Things to Consider

Research. Commercial Collection Agencies will often specialize in particular fields. For example, one commercial collection agency might specialize in working with small and home-based businesses, while another made specialize in securing funds for large corporations. When possible, be sure to determine what size businesses the agency works with and what type of debtors they will go after

Insurance. No matter the level of research you do, you always run the risk of working with a commercial collections agency that uses ͞aggressive͟ debt collection tactics or leaves the debtor with the impressionthat the agency has acted in bad faith, leaving the debtor with the option to sue. No matter the outcome of the suit, whether you win or lose, you want to ensure that you will not be held liable for the actions of the agency. Always retain proof of insurance, otherwise know as ͞Error and Omission͟ ( or E and O͛s), from commercial collections agony you choose in the unlikely event both of you are taken to court by the debtor. Any good and reputable Commercial Collection Agency will be able to provide it for you.

Validity. Different rules apply for different commercial collection agencies in every state and locale. It is imperative that you verify that the agency you want to work with is licensed, bonded and adheres to the rules laid down in the Fair Debt Collections Act

Click Here to see our previous article entitled Understanding the Fair Debt Collections Act.

Debtor Recovery. Good commercial collections agencies will have at their disposal the ability to perform ͞Skip Tracing.͟ Otherwise known as debtor and fugitive recovery, Skip Tracing allows a commercialcollection agency to access several databases that provide them the ability to late a debtor who has ͞skipped town͟ and left no forwarding address; an important tactic to deploy should you find yourself unable to contact a debtor or have been repeatedly ignored.

Fees and Costs. Once you͛ve done your research and found a commercial collection agency that you would like to work with, you need to consider the costs associated with their services. Collection agencies can vary when it comes to charging for their services and it is important for you to choose the one that is right for you and your business. Two common payment structures are contingency and flat fee.

  • Contingency: This payment arrangement type os typically what you will find. Most commercial collection agencies use a no collection no fee model and charge anywhere from 25-45% of the total amount of the debt. This amount is usually determined by the age of the debt and the amount of attempted contacts with the debtor that have been made.
  • Flat Fee: A fairly small flat cost associated with a type of ͞Pre-collection͟ fees. This type of fee is usually offered early on in the debt collecting process.

It is important to keep in mind that once you hire a commercial collection agency, you won;t be receiving the full amount of the total outstanding debt. Consider exhausting all your options before hiring a debt collection agency.

Check out our previous article How to Avoid Using a Collection Agency for more information.

With that being said, as we mentioned at the start of this article, dealing with recovering outstanding debts and delinquent accounts can and will consume your patience, time and resources. Instead of allowing those accounts get away with not paying, calling in a professional commercial collection agency is often the best choice.

How to Avoid Using a Commercial Collection Agency

5 things that you can do to encourage customers to pay on time.
It doesn͛t matter what type of business you own, odds are you will one day face the problems associated with delinquent payers and debt collection. Sometimes it will be a case of oversight on the customer͛s part, other times it will…

5 things that you can do to encourage customers to pay on time.

It doesn’t matter what type of business you own, odds are you will one day face the problems associated with delinquent payers and debt collection. Sometimes it will be a case of oversight on the customer’s part, other times it will be due to willfully and actively avoiding their payment.

Although there are plenty of tips and strategies for proceeding with debt collection, below are five steps you can take to encourage your clients or customers to pay on time and avoid using a commercial Collection Agency

How to Avoid Using a Commercial Collection Agency

1. Credit Check – Although credit checks can be expensive and sometimes time-consuming, nothing could be more important when it comes to avoiding the hassle of a delinquent customer or client–especially in the case of a significant debt. Small transactions are rather pointless for you to run a credit check, they simply aren’t worth the expense or the time invested. However, if the agreement you are entering into is creating a long-term relationship and/or is a considerable amount of revenue that could impact your bottom line, run a credit check. Although not a guarantee of payment, running a credit check can help you avoid using a commercial collection agency to track down those problem clients and delinquent accounts in the future.

2. Checking References. Although readily asked for when applying for a job or renting an apartment, reference checks are often overlooked as a reliable means of determining the risk of a customer or client. Contact their past business partners/relationships to see whether or not their experiences with the risk were positive and whether or not they paid on time. Although it may seem counter-intuitive, invite them to do the same with you.

3. Put it in writing. Putting the terms of your payment arrangement in wiring, including due dates and the amounts owed, is a must. By clearly communicating your terms in writing and having your clients/customers agree to those terms, you ensure your risk against delinquent accounts and help avoid using a commercial collection agency.

4. Accept credit cards. Though not a perfect fit for every business type or transaction, they can be very helpful when a customer/client owes you a large sum of money. By accepting payment via credit card, you shift the burden of debt collection onto a third party, namely the credit card company. The small fee you will pay per transaction is a small price to pay compared to hiring an attorney or commercial collection agency. By accepting credit cards, you can focus on what you’re good at, running your business, and let MasterCard and Visa deal with the collections.

5. Make contact. One of the easiest ways to avoid using a commercial collection agency is to simply make polite and cordial contact with the debtor. It’s entirely possible the customer/client simply overlooked their payment. In this case, a friendly reminder phone call will often do the trick.

A simple phone call, email, or letter on your company’s letterhead notifying them of their late payment simply stating something along the lines of ͞Have you overlooked this?͟ is often times the very best way to begin the collection process.

The fact remains, no matter the steps you take, no matter how diligent you are or the care you take in assessing the risk, you will end up with a delinquent account. However, by following the items outlined above you can reduce your future problems dealing with debt collection and avoid using a commercial collection agency.

The above article contains general legal information and does not offer any legal advice. The law is complex, varies from state to state, and changes often. When it comes to legal advice always contact a licensed lawyer.