In current market scenario, incidences where customers are not repaying their debts or are abruptly delaying it for a considerable period of time, has become quite common. These unpaid dues have turned into a kind of regular and unavoidable issue for almost every large, medium and small organization. This kind of issues, where the bad debt obstructs the flow of capital, of these organizations, heavily damages their future growth prospects.
Although, such issues are really very grievous in nature. But, there are many Debt Recovery Companies and Collection Agencies who offer solution from such kind of problems. These organizations play a pivotal role, in settling the differences. They act like a kind of mediator between the creditors and debtors and try to settle the arisen differences between both of them. This way they play a very vital role by acting like a solution provider at both the end.
These organizations offer their services to those parties, who have given credit, by ensuring that their complete debt will be collected with in a very short period of time. However, for delivering such solutions, these organizations also offer their advise to the debtors and help them arrange finance or make them manage their burgeoning bill, but in a very disciplined and organized way.
There are many significant aspects of these organizations, which has made them very much popular and preferred option for every organization. However, they are a must for those who want to collect their unpaid dues from their customers. The most important benefit of availing the services of these agencies is that they save a considerable amount of time and resources, which otherwise would have spent behind the delinquent customers. This way the saved valuable time and resources are utilized on more important things which are very necessary to intensify the growth of the organization.
Debt Collection Solutions offering organization never just only assist the debtors manage their bill. There are many cases where these organizations have even purchased the complete debt, on behalf of debtors, from the creditor. This way they provide solution to the creditors and also buy time for the debtors to settle their debts.
Collection agencies are experienced in matters concerning debt collection. Debts do not necessarily emanate from lending of money. Some people make purchases and fail to pay up. Other people get services and when it comes time to paying for the money owing for those services, they are nowhere to be found. Therefore, those who wanted the debts to be paid back have tried to get their money back to no avail and that is why they end up hiring these agencies. Before they get to that point of paying for these services, they will try everything they can to get their money back. When nothing seems to work and desperation kicks in, services of the agencies can be solicited.
The first step these agencies will use to collect the debt is by drafting letters. These are not just any kind of letters. Since they are for an official purpose the format will be official. They will be addressed to the person or organization that is in debt. Letter will be jotted on behalf of the client who hired the services of the agency. Contents of the letter will include the reason why it is being written, the exact amount of the money owed, and a polite but firm request for the payment of the debt.
If the letters do not work, then the agency will look for another way to approach the matter. The letter is written to introduce the problem and the addressed person is given ample time to respond to its demands. A second and third letter will be sent and if there is still no response, then representatives of the agency will be sent to directly confront the person or organization. Unlike popular belief, the confrontation will not be violent. It will be a civil discussion between two parties until an agreement is reached.
Those who do not respond to the confrontation will now force the agency to use harsher means. Debts always ruin credit scores and bad credit scores can cause the person to find difficulty getting mortgage loans or even qualifying for loans. Therefore, what collection agencies do at this point is inform the credit bureaus of the impending debt. Proof of the debt will be needed and an investigation will be carried out and then that person will get red flagged. The only way to improve a credit score is by paying up the debt.
When worse come to worse, the collection agencies will involve a lawyer. This is usually as a last resort after others measures have been tried. They never threaten or intimidate the other party because if they did this then it would not look good in court. A judge will look at all the evidence and will want to know if measures were put across to get the other party to pay up before being taken to court. Since letters and credit bureaus have documentation that recorded the confrontation, the judge will rule in favor of the agency’s client and the debt will eventually be paid.
Among the main problems that most people and businesses have today is that of collecting the sales that they have made through credit and terms. While such a practice was meant to boost sales and revenue, debt collection becomes the main problem of concern once the allotted allowance for settlement has arrived. Most companies suffer from bad debts from their receivables and such is a risk once a business establishment approves sales on credit.
Due to these unfortunate events, people would emphasize largely on trying to collect the said receivables even if they would lapse the given grace period for settlement of dues. However in some instances, the supposed client are really incapable of settling their account and thus leaves a company to resort to either seeking legal assistance or for some, recorded as bad debts which add to losses that would be incurred by a company. The latter is of course the extreme recourse once all means for collection has been exhausted, including that of referring such matters towards debt collection agencies.
Resorting to Pro Debt Collection Assistance
Probably the last of the alternatives that a company would have is that of seeking assistance from pro debt collection agencies to help offset the governing debt issues that any entity would find itself in. While this resolution would still garner significant losses for the company, the amount of loss that will evidently be incurred is lower than that of getting nothing at all in return. Certain percentage rates and commissions are among the overriding charges to be incurred since such fees serve as payments for availing of the service.
Comparing the expenses to be incurred in such a scenario would be compared to that of a company leaving the burden towards the hands of hired people in the finance or collections department. However, pro collection agencies are more adept to such scenarios, being aware of such problems and knowing the proper procedures to undertake. This also includes as far as handling the entire scenario in a legal aspect to which demand payment will suffice for erring people who refuse to settle their financial obligations with the organization that hired them.
Assessing the Rate of Expected Debt Collection
For sure, the need to declare bad debts will be dramatically trimmed down. While there is no guarantee that such efforts would be able to remit all the outstanding obligations of endorsed past due accounts, getting a certain percentage over getting nothing at all is better for companies who want to manage their debt deficiencies.
The only factor that a company would put under consideration is the expenses to be incurred for the service. There are a lot of pro collection agencies known today and each would have different costs, depending on their level of expertise and track record. Either way, collecting the impending bad debts of an organization is the main point of concern. Maximizing all efforts to be able to get what is due is the main concern of anyone and large scale organizations are no exceptions.
Dealing with a debt collection agency is rarely easy and it is certainly never fun. If you ever find yourself communicating with a debt collection agency, knowing how to handle it will help make your life easier. Working with a collection agency does not always have to be stressful or time consuming.
1. How to Pay a Collection Agency
Document all of your monthly expenses prior to speaking to the collection agency. You do not want to be pressured into agreeing to a repayment plan that you will not be able to maintain. Knowing your expenses before getting on the phone will help you avoid making promises that you cannot realistically keep.
Get a notebook to be used only when communicating with the collection agency. Start using this immediately and always be sure to document the dates and times you talk to the collection agency along with the name of the agent helping you. Also, be sure to write down any arrangements that are made so that you can reference them quickly in the future.
Find out if there is a settlement plan available for you. Some collection companies are willing to reduce the total amount owed if you are able to pay one lump sum or make two or three large payments. If it is at all financially possible try to take advantage of these settlement programs.
Insist on making all payments through the mail using personal checks. Some debt collection agencies will try to insist that you pay using Western Union, MoneyGram, or other bill payment methods that will cost you money. Other collection agencies will encourage you to sign up for automatic payments which could leave you owing overdraft fees if you miscalculate your finances.
Mailing your payments monthly will help you avoid additional fees and using personal checks will help you build a record of your payment history. If you do not have a checking account consider asking a close relative (parent or sibling) to write and mail checks on your behalf.
Keep copies of all letters, checks, and documents concerning your collection account filed away in a safe place. Having documents verifying your payment history and debt amount will help you keep track of what you have paid and what you still owe. These documents will also help you if, in the future, your debt is sold to another debt collection agency or if you need to dispute information on your credit report.
The FDCPA broadly defines a debt collector as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” While the FDCPA generally applies only to third party debt collectors—not internal collectors for an “original creditor” — some states, such as California, have similar state consumer protection laws which mirror the FDCPA, and regulate original creditors. In addition, some federal courts have ruled that a collector of debt is not a “creditor” but is rather a “debt collector” under the FDCPA where the collector of debt buys defaulted debt from an original creditor for the purpose of debt collection. The definitions and coverage have changed over time. The FDCPA itself contains numerous exceptions to the definition of a “debt collector,” particularly after the October 13, 2006, passage of the Financial Services Regulatory Relief Act of 2006. Attorneys, originally explicitly excepted from the definition of a debt collector, have been included (to the extent that they otherwise meet the definition) since 1986.
The FDCPA’s definitions of “consumers” and “debt” specifically restricts the coverage of the act to personal, family or household transactions. Thus, debts owed by businesses (or by individuals for business purposes) are not subject to the FDCPA.
In the federal tax case of Smith v. United States, the United States Court of Appeals for the Fifth Circuit stated that the taxpayer’s: “. . . . invocation of the Fair Debt Collection Act is entirely without merit, as the statute expressly excludes ‘any officer or employee of the United States . . . to the extent that collecting or attempting to collect any debt is in the performance of his official duties’ from the definition of ‘debt collector.’ 15 U.S.C. section 1692a(6)(C).” In 1998, however, Congress amended the Internal Revenue Code by adding a new section 6304, “Fair Tax Collection Practices,” which refers to and includes certain rules that are similar to some provisions of the Fair Debt Collection Practices Act.
U.S. state laws on fair debt collection generally fall into two categories: laws which require persons who are collecting debts from consumers to be licensed, registered or bonded in order to collect from consumers in their states, and laws that protect consumers from specific unfair practices by debt collectors, which may include collection agencies and sometimes original creditors. Many state laws–unlike the FDCPA–cover original creditors, thus providing greater protections to consumers than the Federal FDCPA.
Although not all states have such laws, the unfair practices that are prohibited generally track those that are also prohibited under the FDCPA. Some states have a complete prohibition against collecting from its residents unless the collection agency has complied with licensing or bonding, others exempt out-of-state collectors from those requirements. Examples of prohibitions of unfair practices by collectors include contacting employers after having been given notice not to do so, pretending to be a government agency, pretending to be an attorney or falsely threatening with a lawsuit. Many state fair debt collection laws also provide for a private right of action (consumers can sue the debt collector) by consumers against collectors that violate their provisions.
Deciding when it is time to get serious about recovering bad debts may be as simple as reviewing current procedures and systems for debt collection. There are proven strategies to make the job less tedious and more efficient. Following these strategies will help you to make great strides in producing more positive results for controlling your bad debts and save you time as well.
Have a written policy on how to deal with bad debt Having a plan or policy about how best to deal with bad debt is an important aspect of debt control and can be incorporated as part of the regular operations for the business. A written policy could include step by step instructions including –
Setting a time limit on overdue accounts
Contacting the customer by phone
Sending reminder notices
Issuing a demand letter
Hand the matter over to a collection agency
Ensure customers understand the terms and conditions of the credit contract
Before approving a credit account with any new customer, make sure they have read and understand your terms and conditions. If a credit agreement clearly states your expectations and is executed by the customer, you have a better chance of the customer honouring your terms and paying on time.
Request a deposit before goods are received
For larger purchases and new customers that don’t have a proven trade history, it is always a safe option to request a deposit or part payment for the goods before they take delivery.
Implement progress payments for services
Some industries use progress payments as normal practice. A builder, for example, will perform the work in stages and invoice at the end of completed tasks. This same principle can be applied to anyone providing services and can be a useful way to introduce a debt recovery agency if the customer defaults at any step.
Maintain accurate records
Maintaining accurate records for all sales, services and related payments is imperative to getting your debts under control and actually preventing bad debts in the future. Therefore, in the event a debtor disputes an amount owing, you will have accurate information to back up your claim for the unpaid moneys.
Document all dealings with the customer
Documenting all phone calls, visits and correspondence with the customer will be invaluable if the account has to be settled in the legal system further down the track. It also gives you information at your finger tips when dealing with the customer at any time.
Hand the debt over to a collection agency after a given time has lapsed
It is important not to let a bad debt accumulated over time as this can have a negative effect on your cash flow and business operations. Handing the debt over to a collection agency makes good sense if you have tried without success to clear an old debt. Furthermore, debt collection agencies are experts in recovery of overdue debt. They will give you the greatest chance of recovery and also allow you to spend time on what you do best.
Prevention
If you find yourself continually having to chase debt, it could be that you need to spend some time improving your existing methods for account control. Preventing customer accounts from exceeding your trading terms could save you valuable time in the long term. Credit checks are also a useful tool to help prevent debts. These can be performed by most mercantile debt collection agencies.
Whatever the type of business, be it large or small, with a single employee or hundreds of staff, all are susceptible to that financial plague known as bad debt.
It is a well-known fact that a business is only as strong as its customers. If those customers are not reliable when it comes to the payment of due bills, then without an effective system in place to recover the outstanding debt and maintain adequate cash flow, the business will head down the slippery slope to oblivion. Debt collection is a necessary aspect of every company.
Most people at one time or another either forget or misplace an outstanding bill. A simple, polite, written reminder or telephone call is normally sufficient to nudge this type of debtor to settle their account and inevitably, immediate payment will follow.
Next are the customers who become slightly overextended and will take a week or so over the normal 30-day credit period to settle their account. Finally we have what may be termed the serial debtor. This is a customer who, having received the goods or services from the business, just either cannot afford to settle the debt or indeed has no intention to do so.
If a business carries out its own debt collection, it must remove staff from their existing jobs so they may be deployed chasing up the outstanding debts, unless of course, additional staff are specifically employed to carry out this function. In either event, it is not really cost-effective for the business to do this, since the first option would mean existing staff are unable to undertake the jobs for which they were originally employed, whilst the second option, will place additional expenses on the business.
Debt collection can be very challenging and involves a lot more than just issuing a few letters to wayward debtors. If handled incorrectly, the business could lose not only money but valued customers and credibility and, in extreme instances, could find itself at loggerheads with the law.
Outstanding debtors curtail business profits, restrict growth and more important, reduce cash flow available for business development.
Debt collection companies can reduce both the costs and risks involved with the process of recovering outstanding debts. A professional debt collection company has the experience necessary to issue non-threatening yet persuasive letters, that encourage the majority of debtors to settle their outstanding accounts in a time frame more acceptable to the business.
As with any other type of business, there are both good and bad debt collection companies. When selecting one, the business should look and examine the following points:
the history of the company and its owners
expertise of staff
methods of debt collection
experience in credit management
client references
calculation of fees
A professional debt collection company will aid any business to increase cash flow, and retain good customer relations, whilst at the same time, freeing up its own staff and resources to take the business forward.
Child support payments are distributed in a variety of ways. In cases where an obligor is liable for specific expenses such as school tuition, they may pay them directly instead of through the obligee.
In some jurisdictions, obligors (paying parents) are required to remit their payments to the governing federal or state child support enforcement agency. The payments are recorded, any portion required to reimburse the government is subtracted, and then the remainder is passed on to the obligee (receiving parent), either through direct deposit or checks.
The first payee for child support depends on the current welfare status of the payee. For example, if the obligee is currently receiving a monthly check from the government, all current support collected during said month is paid to the government to reimburse the monies paid to the obligee. Regarding families formerly on assistance, current support is paid to the family first, and only after said support is received, the government may then collect additional payments to reimburse itself for previously paid assistance to the obligee (receiving parent). See 42 USC 657: “(A) Current Support Payments: To the extent that the amount so collected does not exceed the amount required to be paid to the family for the month in which collected, the State shall distribute the amount so collected to the family.”.
Within the United States, a 2007 study conducted through the University of Baltimore estimates that 50% of all child support arrears are owed to the government to reimburse welfare expenses. Half of U.S. states pass along none of the child support they collect to low-income families receiving welfare and other assistance, instead reimbursing themselves and the federal government. Most of the rest only pass along $50.00 per month. The bipartisan 2006 Deficit Reduction Act and other measures have sought to reduce the amount of money claimed by the government and to ensure that more funds are accessible by children and families, noting that more obligors (paying parents) are willing to pay child support when their children directly benefit from payments.
Regulations and laws on the enforcement of child support orders vary by country and state. In some jurisdictions, such as Australia, enforcement is overseen by a national office. In others, such as Canada, the responsibility to enforce child support orders rests with individual provinces, with financial and logistical assistance from the federal government. In the United States child support enforcement is also handled largely at the state level, but non compliant parents who meet certain criteria, such as traveling across state lines to circumvent orders or owing more than two years of support payments, may be subjected to federal prosecution under the Federal Deadbeat Punishment Act.
One focus of Article 27 of the Declaration of the Rights of the Child is the establishment and strengthening of international treaties to further aid in child support order enforcement across national and international boundaries. Under these agreements, orders established in one country are considered valid and enforceable in another country, and may be pursued through local court processes. The goal of such conventions is to ensure that noncompliant parents will not be able to evade support payments by crossing an international border.
To this end, various international conventions regarding inter-jurisdictional enforcement of maintenance orders have been created, including the Hague Conference’s 1973 Convention on the Recognition and Enforcement of Decisions relating to Maintenance Obligations and the 1956 United Nations Convention on the Recovery Abroad of Maintenance.
More than 100 nations currently have reciprocal arrangements for child support orders. Examples of reciprocal agreements include the UK Reciprocal Enforcement of Maintenance Orders (REMO) and those of Canada, Australia and New Zealand, the United States and the European Union.
Consequences of non-payment vary by jurisdiction, the length of time the parent has been noncompliant, and the amount owed. Typical penalties include wage garnishment and denial or suspension of drivers, hunting and professional licenses. In the United States, noncompliant parents who are more than $2500 in arrears may be denied passports under the Passport Denial Program. Australia, Austria, and Finland do not imprison persons for failure to pay child-support arrears. In the U.S., in contrast, non-payment of child support may be treated as a criminal offense or a civil offense, and it can result in a prison or jail term. On a typically day, roughly 50,000 persons are incarcerated in U.S. jails and prisons as a result of child-support debts. In addition, child-support debtors are subject to fines and property seizure.
The enforcement provisions affecting US passports have thus far survived Constitutional challenges in Weinstein v Albright (2001), Eunique v Powell (2002), In re James K. Walker (2002), Dept of Revenue v Nesbitt (2008), Risenhoover v Washington (2008), and Borracchini v Jones (2009).
