Michelle Dunn’s Credit and Collections Blog

Michelle,

Would sending the “final opportunity” letter and/or the letter stating the account has been reported be considered advising the debtor that we are pursuing other “remedies?” Am I correct in my understanding that this is not a violation of the FDCPA?

Yes, that is correct. Once they send a cease & desist, you can only send one letter letting them know what step you will be taking whatever that step may be. This might be that you are closing the account, returning it to the original creditor, taking them to court, or maybe reporting to a credit bureau.  Most agencies have already reported the debt to the credit bureau at the time they receive a cease & desist, but that might not always be the case.

Michelle,

My company is Collection Results Inc. which of course is printed on the envelope as a return address.  I have not had an issue in 3 1/2 years with this, however I don’t want any issue in the future either!  Should I change the outside of the envelope to read “CRInc”?

Thank you, Judy

Dear Judy,

Yes, absolutely. Anything that indicates you are a collection agency is a violation. For example, my agency was named M.A.D. Collection Agency, I used a couple different return addresses so as not to violate the FDCPA. Such as:

M.A.D. and then my mailing address -OR-

M.A.D.  Agency and my mailing address.

Nothing can indicate you are a debt collector that anyone such as the mailman, a neighbor or anyone else can see. Otherwise this is equivalent to sending a post card stating someone is past due.

Michelle,

How do I get my clients to pay me on time. I’m an Inspirational Speaker & Life Coach. I’m a one-person operation and often have trouble collecting the balance on work done for my clients. Spending my time chasing clients for money is time I can’t spend building my business. Any tips?

Mark Black

Speaker, Author, Coach

Mark,

In order to get your clients to pay you on time, you have to tell them what your payment terms are before you do business with them. You have to let them know when and how you want to be paid and what will happen if you are not paid within that time.

As a credit grantor, your business is one of many that allow consumers to use goods and services immediately and pay for them later. While extending credit increases your gross sales, it also puts you at risk of some losses due to nonpayment.

You can keep bad debts to a minimum and have more success recovering them if you identify them early. Your actions at this point of your credit-collection procedures are vital. Your reaction can mean the difference between recovery or loss. When you identify a potential bad debt, you need to act promptly and decisively. Usually the more time that passes, the less consumers pay.

You should have a standard, in-house written policy on handling accounts. The policy should include when to call new customers, when to call established customers and when to send letters. It is up to you since you are a one person operation unless you hire a credit manager, to make sure the policy is followed and kept up to date. Your policy should change as you grow or add new products or services to your inventory, or if you just want to make more money by having a stricter policy and including discounts and other payment incentives.

Proper and consistent attention involves developing a collection schedule and following each step fully before moving on to the next step. It means that you never move backward or repeat a step in the hope of salvaging an account. Good luck to you!

Michelle Dunn

If you have a business and have customers that owe you money, there is one thing you can change about how you run your business that will make you more money today. Every business owner knows how important it is to keep their customers happy and coming back for more. If your customers are happy and coming back for more, they will tell everyone they know about you and your business. You can’t buy that kind of advertisement.

If you want to make one change to increase your profits, implement a credit policy. You don’t want customers that don’t pay on time or at all coming back for more, so by implementing a credit policy you can avoid that and have good paying customers that will pay on time, spend more money and spread the word about you and what you have to offer.

Customers that are approved for credit, will buy more if they can pay later, so make the process as streamlined as you can. Catering to a potential new customer is good business, so the easier you make it for them to spend more money with you, the more money and sales you will have. One thing that is often overlooked is how to prevent future credit or non-payment or late payment issues, don’t wait until you have bad debt to implement a credit policy, take control of your bottom line now.

I recently had a reader write to me asking about collection software specific to agencies or attorneys that purchase debt rather than work on commission.  If you have a collection agency that only collects on debt you buy, you might want to check out these software options:

• AdvantEdge Collection Software
• Comtech Systems Inc.
• Ontario Systems

Kagan and her husband, Dan, try to make a game of their tightening budget, seeing just how much they can save, “so that it’s not too depressing,” she says. One bright spot: Dan’s in a profession that’s doing well these days. He’s a credit and collections analyst. “Collectors are really busy right now,” his wife notes ruefully.

Thoughts?

John McCain compares Barack Obama to a celebrity like Britney Spears or Paris Hilton.

Would you ever compare a debtor you call to a celebrity?

It was interesting to find out just how many celebrities are either in debt, filing or have filed bankruptcy, or had or have credit problems.

Being in debt can happen to anyone. Be nice. It could happen to you.

We have had an unusual amount of rain this year followed by hotter than normal temperatures here in New Hampshire. Normally we don’t notice the rain or heat unless they directly affect us or are unusual, like this season.

This is also true with small or new business owners. Unless they have unusual circumstances, such as a bad check, or non-payment of a large balance they don’t pay much attention to the credit end of their business. Most business owners do not plan or create rules about what to do when they receive a bad check until they are holding a bad check in their hand. In my years as a bill collector most business owners that I dealt with only realized they had a problem once it was to late. Do not let this happen to you.

There are easy steps you can take to avoid this from happening to you and your business.

One of the easiest and smartest things you can do for yourself and for your business is to implement a credit policy and have each new customer fill out a credit application. A credit application will protect you and your business and let your customers knows that you mean business. Done correctly, it can increase your overall profits and sales now and in the future.

Dear Michelle,

Since the economic downturn, collecting past due invoices has become increasingly difficult.  It is requiring far too much of our time to chase down payments from clients with delinquent accounts.  We’d like to begin employing the help of a collection agency.  We’ve never had to do this before so I was wondering, what should small businesses look for when researching an agency to use?  Although we’d rather get something rather than nothing, at the same time we don’t want to be completely taken advantage of.

Thank you! Hillary Reynolds

Hillary,

Make sure that the collection agency you choose is fully acquainted with the nature of the goods or services involved. Professional collection services are personal in nature. If the collection service is familiar with the goods and services your company provides, it will be better suited to handle the complex situations that come up during collection. For example, some agencies specialize in collecting medical debt, so that wouldn’t help you if you sell tires.

Choosing a collection agency to manage delinquent accounts and other related tasks is a smart decision.  Some businesses understand that they actually save money by letting someone experienced to do the job instead of spending time learning collections. The agency you choose should represent your organization in a responsible and professional manner, and provide a satisfactory rate of recovery while maintaining your public image. This decision involves more that just giving your business to the lowest bidder - it requires careful consideration.

Consider the following qualifications and credentials when choosing a collection agency.

• Is the agency a member of any national trade associations? membership is an indication of professional integrity.
• Does the agency belong to a local Chamber of Commerce?
• Does the agency charge fees that are clearly stated?
• Is the agency prepared to give the best possible service? An agency cannot guarantee results on any specific date, but will often estimate an average recovery rate that one can expect.
• Will the agency be sensitive to a consumer’s individual situation? The agency should promptly notify you when it discovers a consumer who is a hardship case and recommend a proper procedure to follow.

Remember, the agency you choose is a reflection of you and your company.  To find an agency near you visit my member map.

According to Wikipedia, the free encyclopedia, the definition of Credit Money is any claim against a physical or legal person that can be used for the purchase of goods and services. Credit money differs from commodity and fiat money in two ways: It is not payable on demand (although in the case of fiat money, “demand payment” is a purely symbolic act since all that can be demanded is other types of fiat currency) and there is some element of risk that the real value upon fulfillment of the claim will not be equal to real value expected at the time of purchase.

This risk comes about in two ways and affects both buyer and seller.

First it is a claim and the claimant may default (not pay). High levels of default have destructive supply side effects. If manufacturers and service providers do not receive payment for the goods they produce, they will not have the resources to buy the labor and materials needed to produce new goods and services. This reduces supply, increases prices and raises unemployment, possibly triggering a period of stagflation. In extreme cases, widespread defaults can cause a lack of confidence in lending institutions and lead to economic depression. For example, abuse of credit arrangements is considered one of the significant causes of the Great Depression of the 1930s.

You can read the definition in it’s entirety at Wikipedia