Debt Collection Myths
There are a number of misconceptions about creditors’ duties, rights and responsibilities relating to business to business debt collection. Listed below are some of the more widely held misconceptions about the debt collection process:
- Myth: Businesses have the same rights as consumers in the dthe debt collection process. Reality: This statement is not untrue. For example, the Fair Debt Collection Practices Act does not cover the activities of collectors who work directly for the creditor company. The FDCPA regulates debt collection activities performed by third party collection agencies.
- Myth: It is illegal to request one of more post dated checks. In reality, it is not illegal or unethical for a collector to ask for post dated checks.
- Myth: If a debtor is making partial payments, the creditor cannot place the account for collection. Reality: A creditor company can place any delinquent account for collection at any time.
- Myth: Creditors must respond to written proposals received from debtors relating to payment moratoriums or extended payment plans, and failing to do so can legally be interpreted as acceptance of the debtor’s proposal. Reality: Silence does not mean acceptance… even if the correspondence the creditor receives states that failing to respond means the creditor accepts the debtor’s proposal.
- Myth: A creditor must give the debtor advanced notice before referring an account to a third party collection agency or to an attorney. Reality: Absent a contractual obligation to do so, creditors are not required to provide any advanced notice such as a Final Demand for Payment. (Note: Most creditors provide advanced notice because it is in the creditor company’s best interest to do so. Why? Because some debtors will pay once they are notified that their account is being placed with a third party.
- Myth: Depositing one or more partial payments received from a delinquent debtor means the creditor has accepted the fact that the debtor will continue to clear the past due balance with partial payments. Reality: Unless the creditor has agreed in writing to accept anything less than an immediate payment in full of the entire past due balance, the creditor retains all of its rights even if a one or more partial payments are received and deposited.
- Myth: Creditors cannot call debtors more than once a day. Reality: Creditors cannot call continuously or so frequently that their calls are harassment. However, creditors can certainly call a customer more frequently than once a day. For example, it would not be unlawful or uncommon for a collector to call the A/P clerk, the A/P Supervisor, the A/P manager, the Controller and the Buyer on the same day in an effort to obtain a reasonable payment commitment… especially if there is an order on credit hold for that customer.
- Myth: If you ignore collection problem for long enough, the problem eventually may go away. Reality: This is actually true… but in this scenario the unpaid balance is more likely to be written off or credited off than paid by the debtor.
© 2012. Michael C. Dennis. All Rights Reserved. Michael is a business consultant with more than ten years experience helping companies improve their effectiveness in collections.