Notifying a client of a late balance to collections is an important decision. Do you need to refer a customer to collections, or manage the task by yourself?
- You must wait at least 90 days after the date your payment is due, to be sent by a non-paying customer to collection.
- Before you send a client who has not paid to collections, you must make the necessary steps to ensure payment, like calling the customer and sending the letters to collect debt from the client.
- During the collection process You and the collection agency need to not contact the debtor’s employer and contacting the debtor even if the debtor has hired an attorney or threatening legal actions.
- The following article can be used intended for business owners considering the possibility of sending a client who is not paying or client for collection.
mediaindonesia.net– The decision of putting someone to collections must be considered with care. Federal law governs the way you and the collection agencies they contract with can try to collect on a debt.
In this article we outline the rules you need to adhere to in order to keep your company free of legal trouble when it comes to pursuing debts unpaid We also walk you through the steps to take when sending an individual to collections, while still complying with the law.
What exactly does it mean to have someone sent to collections?
Sending someone to collections is to engage a collection company to collect the unpaid debts to you. If you’re trying to contact the client who isn’t paying or a customer yourself via your usual communications channels, or if you’ve sent your client several letters that state the account is in arrears and they’re not going to send your client to collections.
When is the right time to notify someone of collections?
A lot of experts suggest waiting for 90 days following the due date of your invoice for sending the person to collections. It is possible to ask the non-paying customer to pay the balance when the due date is set but you can’t send them to collections until that time. Instead, you could make a few steps to try to get the money.
Things to consider before placing someone in collections
In the 90-day time frame when the invoice is due and the time you decide to refer the client to collections, you should consider these things:
1. Contact the creditor.
A professional, clear phone call could remind the customer of their debt and inform the client that you will get your debt paid. During the call, you should use a pleasant tone but not too firm avoid scolding the client , and then explain to them the ways they can pay for the debt.
2. Send debt collection letters.
It is possible to send letters to collect debt to a client who is not paying or after you have contacted them, or go straight to this step. The first letter should be written with the same relaxed but professional tone that you’d employ on the phone and remind the customer of their outstanding debts. The letters you send out afterward should state your intention to refer the client to collections or take legal actions.
3. Remit your invoice, accompanied by late charges.
Invoices that are revised with an additional late fee (or at times, notifying clients of your intention to send them an invoice) could result in a the client being charged. In this instance there is no need to notify the client of collections.
4. Offer the settlement.
Sometimes, it’s better to settle a dispute by offering the payment, which, although less than the original debt is, it settles the issue. Because of the cost that collections can become, settlement could bring in more cash for you.
5. You can go to the small claims court.
If these steps haven’t led to a settlement or settlement, you can bring your customer to small claims court, if the amount you owe is less than the state’s small claims maximum. There is no need for an attorney to represent the client at small claims court and if the client doesn’t make an appearance, you’ll are automatically a winner in the case.
6. Find an attorney.
If your debt is too significant to be considered small claims court, you can engage an attorney to take your case before the court. This doesn’t start the collection process, but in fact, filing a lawsuit against your unpaying client will replacethe collection procedure. But, deciding to use collections instead of suing a customer, might be more beneficial, because even though both are costly, collection agencies can be less expensive (while conserving you time).
What you should avoid doing in the collection process
If you employ an agency to collect your debts or manage collection yourself All debt collection procedures should conform to the Federal Fair Debt Collection Practices Act (FDCPA). Infractions to this law could cause your collection agency and you look untrustworthy and could give your debtor better argument should they decide to bring you to the court.
Be sure that neither you or your collection agency do these things during the collection process:
1. Call the debtor on the hour.
In accordance with the FDCPA that applies to debt collection, calls must not be made before eight a.m. or later than the hours of 9 p.m. within the time zone of the debtor. A possible exception is when the debtor requests to make a phone call with your collection agency or you outside of these hours.
2. Contact the workplace of the debtor.
A debtor may ask to have you, or the debt collection company not call them at their place of work. In accordance with the FDCPA the debtor as well as your collection agency have to respect this request.
3. Directly contact the person who owes you for a lawyer if they have one.
The FDCPA also stipulates that neither you or your collection agency will be able to contact the debtor directly in the event that the debtor has hired an attorney. In this case all communications must be made directly with the lawyer, who will then discuss matters of debt collection directly with debtors.
4. Contact family members and friends of the debtor.
In accordance with the FDCPA You or the collection agency are only allowed to contact relatives or friends one time and only contact them to find the debtor. There is no time for your agency or you disclose that the debtor is owed money.
5. Do not verify the legitimacy of the debt.
Collection agencies must provide the creditor with a confirmation notice within five days of the first contact with the debtor. Before you engage a collection company make sure to confirm whether they have experience in delivering the debt confirmation letters.
6. In the event of legal action, threaten to go beyond lawsuits.
A collection agency is not able to sue on behalf of a debtor and it is not able to confiscate a debtor’s assets or take their wages. The agency couldindicate the fact that an account is being held in collections on the credit report of the debtor and they are able to periodically communicate with the debtor (except as previously mentioned) but that’s the only thing they can do. It’s your decision if you’d like to take the matter to the court.
7. False statements are made or send fake documents.
The FDCPA restricts you or the collection agency that represents you in making deceitful claims, either verbally as well as in written. You are not able to describe the debtor’s refusal to pay as a crime and pretend to represent yourself as an attorney. Also, you shouldn’t provide false or misleading documents that appear that the court, lawyer or even a federal or state agency is pursuing actions on the creditor.
How to hire an agency for collection to manage your debts
If you choose to take a client into the collection process, below are a few suggestions to consider in assessing the company you should choose:
- Specialties of agencies. An agency that is skilled in recouping debts from B2B clients might struggle to achieve the same feat in the case of B2C debts.
- Qualifications and certificates. A trustworthy debt collection agency is a member of the Commercial Collection Agency Association (CCAA) and will be accredited by the Commercial Law League of America (CLLA) and are licensed by the appropriate state in addition.
- Tactics. Contact your agent to describe the strategies they usually employ to collect debts, and how they will be in touch directly with you through the collection process.
- Insurance. Collections work can be risky and abrasive, therefore you must ensure that you’re not held accountable for the actions of the agency. Make sure to inquire with the agency if they have error and omissions coverage; if they have it (and provide evidence) then you’re free of responsibility.
- Contracts. Ask the agency what a it is that a contract is binding and what happens in the event that you decide to violate the contract. You can ask to look over the contract prior to agreeing to cooperate with the company.
- Costs. Employing an agency for collection is not a viable option. Clients you transfer to collections may not be clients anymore. It’s also costly. Take into consideration whether the cost of sending the collection agency the debt is worth the cost you’ll have to pay to get the debt paid. If it’s not, keep exploring the other options listed above, and then reconsider the best way ahead.
Check out our article on small businesses hiring collection agencies as well as read the reviews of our collections agency review.