Accounts Retrievable Systems - Basics Of Debt Collection
Ten Tips to Successful Debt Collecting
Tips on how to collect debt:
PREPARE: Review the paperwork on the debtor before making the call. Know the history of the account, credit record, the promises kept/broken. Have all records in front of you, ready for reference.
ATTITUDE: Adopt a straight, professional business-like attitude. You have a contract, you delivered the goods, money is owed, and you have a right to expect payment. Never let it become personal. Don’t yell or raise your voice; and NEVER swear. Don’t threaten; legal action is your recourse.
CONTACT: Make sure you’re talking to the right person. Don’t let the individual brush you off with “You’ll have to talk to the bookkeeper.” Identify the person who will pay the bill. If you can’t get through after several calls, tell the secretary that you know your calls are being screened. Indicate the purpose of your call and if necessary give deadlines.
CONTROL: Control the conversation. Keep it focused on the debt and on the repayment schedule. Don’t let the customer sidetrack you with personal history, excuses, etc. Remember, the object of your call is to collect money, or get a commitment, not to become buddies with the customer or win arguments.
FLEXIBLE: Be ready to adjust to the situation. Think about the kind of customer you’re dealing with and adapt to meet the circumstances. Be prepared to accept a reasonable payment schedule, and a willingness to deal with a customer’s circumstances.
NOTES: Keep detailed, accurate notes of every contact with the customer. Probe for further information on the customer. Notes of these contacts will help you in subsequent phone calls, and may be invaluable in litigation. Good notes will also help in further credit decisions, or in cases where skip tracing may be needed.
PRODUCTIVE: Keep contact brief and to the point. This is a business call, not a social one. View your efforts on a ratio of time expended to results achieved. Long conversations probably mean the customer is stalling you, or trapping you in the buddy syndrome.
PRECISE: Never leave a contact open ended, such as “We’ll talk next week,” or “I’ll send what I can.” Every contact should result in a commitment to payment, of a specific amount, by a specific date, even the check number the customer is using to pay the pledge.
TIME: The longer an account is held, the less likely it is that it will be recovered. If payment or a payout is not arranged within 90 days, place the claim with a collection agency or start legal proceedings.
PLACEMENT: Use only an agency that is a member of the American Collectors Association OR the Commercial Collection Agency Section of the Commercial Law League of America. This will insure that you’re dealing with ethical professionals who are fully bonded to guarantee your remittance.
Accounts Retrievable Systems - Finding A Great Collection Agency
Good debt collectors are hard to come by when choosing a collection agency. Good debt collectors once they are talking with a debtor, probe to find out what is going on. Often, the loss of a job, an illness, divorce, or maxing out the credit cards results in a person becoming dysfunctional when it comes to handling his/her financial obligations. He/she is embarrassed and frequently a little frightened and reluctant to discuss the problem. Good debt collectors and a good debt collection agency will often be able to draw the debtor out. Debt collectors are not allowed to play attorney by advocating bankruptcy. In fact, they have to be very precise when talking with debtors.
However, they can suggest debtors who said they have financial difficulties contact a legitimate credit counseling service. the credit counseling service will help the debtor to work out a payment plan that will enable him/her to gradually pay off creditors. You as the collection agency will have a small commission deducted from the money that is earmarked for you, but it is well worth it because you will be cashing checks on a monthly basis.
Accounts Retrievable Systems - Debt Collection Agencies
Having customers who delay payments has become a common scenario these days. Unpaid dues or bad debt is an unavoidable problem for all organizations which further lead to restricted cash flows hampering the growth of the business.
Debt collection companies play a vital role in settling differences between the debtors and creditors. They act as solution providers at both ends. The collectors offer services to creditors and ensure that all their debts are collected within the shortest time possible. They also assist debtors manage their bills in an organized way. Collection agencies are an asset for all businesses as they are experts in the collection of unpaid dues from delinquent customers. They save valuable time and resources that can be used for business growth. Occasionally, collection agencies will purchase the debt from the creditor. However, usually all that the collection agencies acquire is the right to carry out the process of debt collection.
It is important that one should visit these organizations over the Internet to know the services being offered. Many companies have special training programs for their agents for handling their clients with much care and better understanding.
The main aim of these agencies is to make sure all payments made by the debtors reach the creditors within the shortest time and, no bills are left unpaid. When one hires the services of a collection agency then they have an agreement wherein the agency takes on the responsibility of tracing the debtors and collecting the debt in accordance with the Fair Debt Collection Practices Act (FDCPA).
Small businesses are hesitant to ask for unpaid dues too strongly. This is because they are not familiar with the rules and regulations of collecting debts. They are not clear on how and when to ask for payment that is overdue. Another reason for their hesitancy is the fear of losing future business with the customer. It is where the debt collection companies come into the picture.
Collecting debts is arduous and time-consuming. Collection agencies offer professional services to handle this task efficiently. By reducing bad debts and enjoying good customer relationships, the business is bound to do well.
Accounts Retrievable Systems - Choose Collection Agencies
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.
Accounts Retrievable Systems - Hiring A Collection Agency
As an account ages, the chances of collecting on it decrease dramatically. It’s expensive to carry accounts that you will not be able to collect using the methods at your disposal. It sometimes becomes a better use of your company’s time and resources to concentrate on other aspects of your business. You might do this by hiring a credit manager, to do the collection work you have been doing, but as your business grows, you may then have to place the accounts with an outside collection agency. Using a collection agency can be profitable for your business and help you grow. Some collection agencies charge more for older accounts; this is because they are much harder to collect.
A professional collection agency service can assist you in collecting accounts that remain delinquent. Collectors have a vast knowledge of collection techniques, technology and compliance issues. Using a professional collection service will save time and likely yield better results than you can achieve on your own.
When accounts reach 90 to 120 days past due, it’s time to consider placing them with a collection agency. Some people place accounts at 60 days; some wait over a year-it is completely up to you. If you wait over a year it is unlikely you will get paid, but possible. If you are letting something sit on your books and grow older without actively pursuing it, it is worth it to give it to a collection agency. It’s not going to get collected if you keep it, and the percentage you will pay the agency will be well worth it.
Look for the following signs that indicate that you may need to work with a collection agency:
• A new customer does not respond to the first letter. For some unknown reason, the consumer will not or cannot pay. Potential losses could be kept to a minimum by prompt referral to a collection agency.
• Payment terms fail. In some cases irresponsible consumers pay when and if they want to. This group is responsible for 25 to 50 percent of the cost of collections. Cost and potential losses are reduced by quick action.
• The consumer makes repetitious, unfounded complaints. Such consumers are often better handled by a collection agency. You have to decide if this is worth your time or would you rather pay an agency a small percentage for that time and still get paid.
• The consumer totally denies responsibility. Without professional help, these accounts are usually written off as total losses. This is when it is good to have a signed credit application or contract and also, if possible, proof of the order and who placed it.
• Delinquency coexists with serious marital difficulties. These also require professional collection help, with the added urgency of obtaining payments before the disappearance of one or both of the responsible parties. If divorced people say the other is responsible, get a copy of the divorce decree, which will state who is responsible.
• Repeated delinquencies occur along with frequent changes of address or jobs. This group is responsible for 90 percent of all “skips.” A skip is a consumer who has moved without informing creditors or leaving a forwarding address. The chance of finding a consumer and collecting a debt will decrease over time, so quick action is important. Most agencies provide a skip-tracing service.
• Obvious financial irresponsibility is apparent. In such cases, little hope exists for voluntary payments and a quick settlement.
• There is an unauthorized transfer or disposal of goods delivered in a conditional sales contract.
Working With a Collection Agency
Once you decide on a collection agency, use their forms to list accounts or their format to upload accounts electronically. Give as much information as possible-accurate information about the account will improve collections.
In all cases, the minimum information should include:
• The correct name, address and telephone number of the debtor
• Name of the debtor’s spouse, if applicable
• Whether mail has been returned
• Debtor’s and/or spouse’s occupation or last known occupation and phone number
• Names of relatives, friends, neighbors and references
• Summary of any disputes
• Date of last transaction, order or payment
• Cellular phone, fax, e-mail address
• Nicknames or aliases, maiden name
If you have had all new customers fill out a credit application, all of the above information should be listed on there. The summary of disputes would be in the computer notes for the customer’s account. This makes it very easy–all the information you need, basically all in one place, on one piece of paper. This is one of the reasons why a credit application is so important. Cooperate with your collection agency. Rely on their experience, diligence, and judgment for the best and quickest results and promptly refer any contact from the debtor to the collection agency. Make sure that your collection agency is familiar with the nature of your goods or services–some agencies even specialize in collecting on specific services. For example, you might find an agency that only collects on delinquent auto loans, or medical bills, or hot tub sales. If you find an agency that specializes in your field, check them out; there is a reason they only do those types of collections. Don’t place any accounts with more than one agency. Make sure that if you change collection agencies, the accounts are only being worked on by one agency. Collection agencies’ fees are based on results, not on time spent on the account. Don’t expect payments to be made immediately.
How Collection Agencies Get Paid
Most collection agencies charge a commission or percentage based on the many factors of the accounts they are trying to collect. Some agencies charge a flat monthly fee, and some charge per letter or call.
If an agency charges a commission, it will normally be a percentage for “standard” accounts. That would be accounts that are maybe 60 days old, have a good address and phone number, and the debt is probably collectible. My collection rate was 25 percent when I owned my agency. That was for everyday accounts my clients placed. If they had an account that was under $75 or over one year old, I charged a 50-percent commission. When I had a large client placing many accounts weekly or monthly, I would give them a special flat rate of 18 percent on all accounts across the board.
Some agencies will charge a flat monthly fee based on the number of accounts you place, how frequently you place them, the dollar amounts, and age. They also may charge per letter or per phone call and let you decide the frequency of each. Collection agencies may also offer other paid services at a flat fee. Check out their websites and compare to see what the average fee structure is and what works for you and your business.
Have you received a debt collection letter or received numerous phone calls from Collection Agency. If you are wondering why you are receiving so many debit collection calls or letters is to understand what is Collection Agency?
Collection Agency is well defined business model that pursues individuals or business to collect payments on debt owed by them. These collection agencies have tie up with banks, credit card companies or business and act as their agents to collect debts from individuals and business for a small fee.
There are two types of collection agencies. The first type of collection agency is the one, which act as agents for creditors (banks, credit card companies, business etc). They pursue defaulters and recover complete debt for businesses. In exchange of there service lenders would pay a percentage of recovered amount to collection agency. The second type of collection agency is the one which work as debt buyers. They buy full debt from business for fewer amounts and then pursue defaulters to recover complete amount. Business also uses this option to remove bad debt from their account receivables. This helps them to keep clean account and same time to get some amount against bad or risky accounts.
Since the nature of job is to recover money and there are many financial constraints attached to this business. Due to this sometime collection agency overstep and pursue aggressively and sometime use abusive practices. In United States they are suppose to adhere Fair Debt Collection Practice Act. Failure to abiding the law they can be sued under United States constitution. In some cases debtors have sued the collection agency for their aggressive and abusive practice and won cases with monetary damages.
Let us understand the process of debt collection by collection agency. First an individual may have taken loan from banks, lenders or used available balance on credit card. Due to some reasons individuals is not able to pay loan or balance back to lenders. Usually in this case lenders and credit card companies will enter into some type of payment plan to help an individual to lower monthly payments. Some of the individual take this option and some simply walk off without paying the balance. For those bad accounts business take help of collection agency to recover the owed amounts. Since collection agency are only in the business of collecting bad debt. Due to this they pursue aggressively and recover money in most of the cases.
People should be aware that collection agency has authority to report credit bureaus operating in United States, if you fail to pay owed debt or could not work with collection agencies. They will report to credit bureaus with full account details with a negative remark. Once derogatory remark is reported in an individuals consumer file at credit bureaus, it will severally damage your credit score (three digit number to see an individuals trustworthiness). The lower credit score will keep you out from getting lower interest rates on home loans and credit cards. It also makes difficult in getting homes or rental homes. Also remarks from collection agency on consumer report stay for 3 to 4 years.
Does this means an individual should give up against aggressive tactics used by collection agencies. The answer is big no. First an individual should check receipts for the account and see how much was paid to lender or business and verify complete account details. In case an individual is in hardship one can enter in payment plan with collection agency. This will provide you some time to pay balance.
In all conditions opening communication channel with collection agency is in favor of consumer. In case of harassment calls, harsh language used by collection agencies consumers should report to local authority or make complaints to state consumer authorities.
In all communication keep record of documentations such as calls made or received, letter sent or received, payments made and all old documentation related to original loan or business transaction.
Accounts Retrievable Systems - When To Use A Collection Agency
What is a collection Agency?
A collection agency is a specialized organization that acts on behalf of a creditor to collect overdue amounts. A collection agency usually does not take ownership of the debt but just acts on behalf of its clients to organize the collection activity. It does not guarantee the collection.
Why do people fail to pay?
There are many reasons why people do not pay on time. A lot of the time people just don’t want to pay. Sometimes genuine financial difficulties, particularly of a temporary nature, are among the causes. In such cases, the person is likely to pay as soon as his financial problems are over.
The downside of using a collection agency
The persons owing the money generally view using a collection agency with apprehension. This makes them view the approach by a collection agency in a negative light. This might cause them to resist any attempts to collect money from them, even if it’s genuine. Moreover, it might result in loss of genuine and valuable customers, from whom the money would come to you in course of time, although they might have delayed the payment temporarily or in a particular case.
It is, therefore, apparent that using a collection agency should generally be the last resort. There are a few collection agencies that specialize in early intervention on a diplomatic basis.
Use a collection Agency when the case is clear
The thing that can be inferred straightaway from the above is that you should use a collection agency when you are reasonably certain that the party has the capacity to pay, is obliged to pay the amount, and is refusing or is unwilling to pay. Also the debt should be due – in fact overdue. It’s always better to wait for a short while and make your own attempts through reminders and follow up with the party before you approach a collection agency.
When not to use a collection agency
You should also consider when it is inappropriate to use a collection agency. There are many situations in which the debtor may have her own defense, and initiation of any formal or legal proceedings may become counterproductive and lead to unnecessary delays and complications. First of all, you should consider whether the debtor – the person owing the money to you – has, or thinks he has, a valid reason for not paying. If this is the case, it is very likely that he would be prepared for a fight even if it means a prolonged legal battle. This works to the advantage of neither of you. In such cases, it is better to first try and sort out the issue, if possible. Among other things, this is going to happen if the amount in question is under dispute. If this the case find out the cause for the dispute and try to settle it through proper communication and discussion. Another thing that might happen is that there is another claim against you that the debtor is trying to adjust against the current debt. In this case it is better to sort out the issue in totality.
Other difficulties and issues
Even where the debtor has no valid reason there might be circumstances under which it might become difficult to recover the amount legally. For example the debtor might not be solvent enough to pay the amount. Legal recourse would only establish your right at the most, but would not obtain the payment to you. Bankruptcy also prevents collection activities.
The cost of using the services of a collection agency
You must remember that using a collection agency involves payment of fees to the agency itself. Another consideration is the fact that legal proceedings initiated by the collection agency under circumstances similar to the ones outlined above could make your life more difficult and make the collection process long drawn out and of uncertain outcome. Because of this, it is better that you retain control over this process and over the decision as to if and when to proceed legally.
When you have security
If you possess a collateral security, it is best not to proceed legally or engage a collection agency if you can use the security to recover your amount.
Accounts Retrievable Collection Agency - Child Support Collection
If your child’s other parent sues you and gets a judgment against you for unpaid child support, that parent has a whole host of collection methods available (more than without a judgment for child support arrears). And even if the custodial parent got the judgment in one state and you have since moved to another state, that parent can register the judgment in the second state and enforce it there.
The most common method of collecting a judgment for overdue support is wage garnishment. The custodial parent can also seize your personal property.
What Is Wage Garnishment?
A wage garnishment is similar to income withholding. ( A portion of your wages is removed from your paycheck and delivered to the custodial parent before you ever see it. In many states, the arrears need not be made into a judgment to be collected through wage garnishment.
Procedures for Wage Garnishment
To garnish your wages, the custodial parent obtains authorization from the court in a document usually called a writ of execution. Under this authorization, the custodial parent directs the sheriff to seize a portion of your wages. The sheriff in turn notifies you and your employer.
How Much Can the Court Take?
The amount garnished is a percentage of your paycheck. What you were once ordered to pay is irrelevant. The court simply wants to take money out of each of your paychecks — and leave you with a minimum to live on — until the unpaid support is made up.
If a court orders that your wages be garnished to satisfy any debt except child support or alimony, a maximum of roughly 25% of your net wages can be taken. For unpaid child support, however, up to 50% of your net wages can be garnished, and up to 60% if you are not currently supporting another dependent. If your check is already subject to wage withholding for your future payments or garnishment by a different creditor, the total amount taken from your paycheck cannot exceed 50% (or 65% if you are not currently supporting another dependent and are more than 12 weeks in arrears).
How the Garnishment Is Initiated
To put a wage garnishment order into effect, the court, custodial parent, state agency, or county attorney must notify your employer. Once your employer is told to garnish your wages, your employer tells you of the garnishment.
Requesting a Court Hearing
You can request a court hearing, which will take place shortly after the garnishment has begun. At the hearing, you can make only a few objections:
– The amount the court claims you owe is wrong.
– The amount will leave you with too little to live on.
– The custodial parent actively concealed your child, as opposed to merely frustrating or denying your visitation (not all states allow this objection).
– You had custody of the child at the time the support arrears accrued.
If you’ve got a money judgment and want to collect, here’s how to start.
1. Don’t start too soon.
Don’t be in a rush to ask for your money. Most states give a losing party the right to appeal, so it’s usually a good idea to wait until the deadline for filing an appeal (usually 30 days or so) has passed. If you start bugging the other party sooner, you may just nudge him or her into filing an appeal. And generally, the other party doesn’t have to pay a judgment while an appeal is pending.
2. Ask for your money.
A surprising number of debtors will pay their court judgment if you ask nicely. A business-like request for payment is often all it takes, especially if you mention that an unpaid judgment will probably show up on the debtor’s credit report. Don’t tell the debtor exactly how you plan to collect your judgment if he or she doesn’t pay up, however — this may just encourage the debtor to start hiding assets.
3. Suggest ways the debtor can raise cash to pay you.
Once you win a court judgment, you are legally entitled to your money. If the debtor claims he or she wants to pay but doesn’t have the money, suggest some ways to raise cash — for example, by borrowing money from a friend or relative, taking a cash advance on a credit card, or dipping into retirement accounts.
4. Start with easy-to-reach assets.
When you’re planning a collection strategy, it makes sense to start by going after the low-hanging fruit. Wages, bank accounts, and money paid to a debtor’s business are all relatively easy assets to grab — and the procedures for doing so are simple and inexpensive. On the other hand, trying to force a sale of the debtor’s vehicle, house, or personal property can be complicated, expensive, and time consuming.
5. Don’t harass the debtor.
Although you are entitled to go after your money, you should not harass or threaten the debtor. Avoid practices like calling the debtor early in the morning or late at night, repeatedly visiting the debtor at work, or threatening to harm the debtor for failing to pay. Humiliating or intimidating a person who owes you money can be counterproductive, and it could even get you sued.
6. Consider settling for less.
You have the legal right to collect the full judgment you won, but that doesn’t mean that you’ll be able to do it. It can take a long time to collect a judgment, and you might have to spend a lot of energy tracking down the debtor’s assets (or waiting for him or her to acquire some), taking them, and converting them to cash. In many cases, it makes more sense to settle for a bit less than the full claim, in exchange for having the whole thing over and done with.
7. Pay attention to timing.
In many circumstances, you’ll want to move quickly, in order to maintain the element of surprise. For example, a debtor who knows that you plan to go after the money in his or her bank account is likely to close the account and move the cash — before you ever get your hands on it. You’ll also want to make sure to move at the right time — for example, by going after the debtor’s bank account right after he or she deposits a paycheck, not right after he or she pays off a mortgage.
8. Keep tabs on the debtor.
Until you’ve collected your judgment, you will have to keep tabs on the debtor. You’ll want to know if he or she moves, gets a new job, buys an expensive vehicle, or inherits money, for example. Make a point of calling the debtor periodically — and stay in touch with any mutual friends or business contacts who might have valuable information.
9. Consider hiring an expert, if necessary.
There are plenty of collection professionals out there, who will try to collect your judgment in exchange for a percentage of whatever they are able to get from the debtor. If you have had no success in collecting your judgment or you aren’t willing to spend the time and effort necessary to get your money, hiring an expert might be a good idea. After all, it’s better to get some of the money you’re owed than none.
10. Know when to give up.
There are lots of way to collect a judgment — but all of them take time and money. And even though you’re entitled to recover many of the costs of collecting a judgment from the debtor, that won’t do you much good if you can’t even collect the original judgment. Remember the old saying, “Don’t throw good money after bad”? If you’re dealing with a debtor who is unwilling or unable to pay, you might eventually have to decide to cut your losses.
Good debt collectors are hard to come by when choosing a collection agency. Good debt collectors once they are talking with a debtor, probe to find out what is going on. Often, the loss of a job, an illness, divorce, or maxing out the credit cards results in a person becoming dysfunctional when it comes to handling his/her financial obligations. He/she is embarrassed and frequently a little frightened and reluctant to discuss the problem.
Good debt collectors and a good debt collection agency will often be able to draw the debtor out. Debt collectors are not allowed to play attorney by advocating bankruptcy. In fact, they have to be very precise when talking with debtors.
However, they can suggest debtors who said they have financial difficulties contact a legitimate credit counseling service. the credit counseling service will help the debtor to work out a payment plan that will enable him/her to gradually pay off creditors. You as the collection agency will have a small commission deducted from the money that is earmarked for you, but it is well worth it because you will be cashing checks on a monthly basis.
