If a customer owes your local business money, it's hard
not to feel angry, like you want to do anything possible to
get your money back. But the days of going all out to collect
on a debt over.
The Fair Debt Collection Practices Act, designed to protect
consumers from harassment or intimidation, sets firm limits
on what you can do to collect a debt from a consumer. The
federal debt collections law even prohibits practices that
were once standard, and that you might not consider harassment
at all.
Besides, as a local business, you have an even more powerful
reason to be especially careful about legal debt collection
issues. You have something much more valuable at stake than
a lawsuit: your business's reputation in the community.
Legal Debt Collection Best Practices
There are plenty of articles on the web that lay out in plain
English what the Fair Debt Collections Practices Act says
you can and cannot do. For instance, this article: [link to
small business debt collection law cheat sheet] Just to give
you some idea of the law's requirements, here are some of
the biggest:
No telling any third party about the debt (except collection
bureaus, collection agencies, or the debtor's attorney).
No calling on the telephone 9 pm - 8 am, or calling repeatedly
in a way that is annoying.
No postcards or envelopes that mention the debt.
No threats to take actions you cannot or will not really
take, such as seizing property, in the case of an unsecured
debt.
No misrepresenting yourself (e.g., "Hi! This is
the Publisher's Clearinghouse Sweepstakes. May I speak to
John?").
No paying down the debt with payments the customer has
directed be applied to other debts
Tips and Tricks for Legal Debt Collections
With all these limits on what you can do to collect a debt,
what can you do legally?
Speak with the debtor personally on the telephone; most
likely he or she wants to pay but is in over his or her
head. Begin by asking what circumstance has kept him or
her from paying. Offer to set up a repayment plan.
You should both send letters and make telephone calls.
Many people will only respond to one or the other.
Document every part of the collections process. Take
notes for each call and keep a copy of each letter. If the
debt does ever go to court, you will have proof you acted
legally.
Look into reporting the debt to credit bureaus. If you
can, and are willing to do it, you can tell the debtor that
not paying will impact his credit rating.
Best tip of all: hand over the job to a dedicated
collection agency. Small business debt collection services
start at as little as $20 per debt.
The fight to get paid is a fight no business should have
to involve itself in. Unfortunately, debt collections are
a part of business. Just make sure that for your local business
debt collection law is followed to the letter, or legal proceedings
may become part of your business, too.
Joel Walsh writes for Collection Agency Information:http://www.collection-
agency-information.com?%20collection%20agency [Web publication
requirement: create live link for the URL/web address with
"collection agency" as visible link text/anchor
text; if offering for re-publication (article bank, aggregator,
or clearinghouse), no link text required.]
