This post is not about the Fair Debt Collection Practices Act and the rights of consumers to be protected from abusive debt collection practices. Certainly, a debt collection agency must be in compliance with the law, but there have been many articles written on that subject. So, if you are reading this article looking for information on how to stop collection calls, stop reading now.
However, if you are a small Maine business owner or entrepreneur and you are not getting paid by customers, and want to hire a collection agency, this post will help you get a realistic idea of what you should and should not expect.
Here are some things your Maine collection agency can (and should) do for you:
Help locate customers who have moved – A big part of debt collection is finding debtors and their assets. You should never pay an additional fee for research as it is an integral part of the collection process.
Give you ideas on how to improve your credit practices – The best collection is the one you can make in house without having to send to a third party.
Save your time and let you focus on your business while they focus on getting you paid – Certainly you should make an effort to recover money, but after a while it simply does not make sense to use productive time chasing bad debt. Also, debt collection agencies have special tools and training.
Advise you on information needed to assist with the collection and maximize results – Ask your collection agency to advise you on the process, and ask them to tell you what information they will need to get the job done.
Here are some things your collection agency cannot (and should not do):
Change the financial situation of your customers – If someone is in a cash crunch, you may not be able to get all your money at once, and you should be realistic and flexible with your agency if they ask you to accept small payments or a settlement. A good debt collector is a skilled negotiator, and they will work hard to get you paid, but you may have to be patient and be paid over time. Remember that most agencies are paid on a contingencybasis, which means they only get paid when they get results for you. So, if they ask you to take a settlement or payment plan, it is because their experience tells them it is best option.
Ruin someone’s credit – We get it. It makes you angry when you do not get paid. However, credit reporting is only one tool and recent changes in the law lessen the impact of single item anyway. So, one item reported to the credit bureau will not ruin anything. Focus not on being angry but on the goal of getting paid.
Charge fees that are not in your contract or prohibited by law – If you want to recover collection costs or charge interest on past due accounts, you must have a customer contract that allows it. In addition, you must be in compliance with state laws. Some states allow recovery of all or part of your collection fees, others do not. Certain rates of interest are considered by law usurious, or excessive. A good customer contract will be your best friend. Contact your attorney today to get one.
Collect debts that are legally uncollectible – Each state has a time limit, or statute of limitations that governs how long a debt someone can be held liable for the debt. Also it is illegal to collect a debt that is under the protection of the bankruptcy court. So, do not wait to long to send accounts off for collection!
Collect debts from parties that are not liable for them – Once again, the need for a customer contract is important. When you are providing product or service to a business, especially a new business, you should ask for a personal guarantee. A personal guarantee means that a business owner takes personal responsibility for debt of their company if they go out of business.
Similarly you cannot hold heirs responsible for a debt of a deceased relative. However, if there is an estate with assets you can make a claim against the estate in an attempt to recover.
In the end, it comes down to communication with your Maine collection agency. Use your agency not simply as a commodity but as a trusted partner. It is perfectly fine to have high expectations, but your expectations must also be realistic.