When in Doubt, Follow the FDCPA

What is the FDCPA, and how can it help you as a debt collector?

Even if you’re not a third-party debt collector, following all the requirements of the Fair Debt Collections Practices Act (FDCPA) can help you avoid violating state laws, some of which impose similar restrictions on all debt collectors.

Commercial debts are not subject to the FDCPA, so generally you’re not restricted by those laws while collecting against commercial debtors. You must still be careful though, because sometimes it’s not immediately clear which debts are commercial and which are for personal or household use. Also, the trend among states is to extend protection against debt collection to all debtors, regardless of the nature of the debt.

It’s wise to follow the FDCPA requirements even when collecting commercial debts. Although following the FDCPA can protect you if you mistakenly believe a personal debt is commercial or when state law is broader than federal law, you’re doing more than following the adage of “better safe than sorry.” For the most part, the provisions of the FDCPA are consistent with good collections practices. They help define and justify collections procedures that can keep your operations both professional and ethical.

Read more in this month’s article.

Get Help from Michigan Debt Collection Services

Have questions about collecting debt, or ready to file a claim? Whatever part of the process you’re at, reach out our Michigan debt collection services at (248) 645-2440 or submit a contact form here.

Play by the Rules when Collecting Debt

What’s the best way to cover your bases when talking to a debtor?

When you work with consumer debtors, you should assume that the debtors are fully aware of their rights and are secretly looking for a way to sue you for violating those rights. Work from the expectation that your debtor is sophisticated:

• Assume that the debtor is keeping notes every bit as good as yours, maybe better. Assume that their records will include dates and times of any phone calls, whether you’re calling at inappropriate times or in a highly repetitive manner (for example, ten calls in a single day), and whether you’ve violated restrictions on communications with third parties, such as their employer.
• If the debtor requests verification of a debt, provide it. Supply the contracts, invoices, and statements underlying the debt. If they request them again, provide them again (and again, and again).
• Make sure that you provide accurate balances for debts. Don’t charge any unauthorized fees or interest rates beyond those permitted by your contract or state law.

Read more in this month’s article.

Get Help from Michigan Debt Collection Services

Have questions about collecting debt, or ready to file a claim? Whatever part of the process you’re at, reach out our Michigan debt collection services at (248) 645-2440 or submit a contact form here.

Staying Professional when Calling Debtors

What’s appropriate to say to a debtor when trying to collect?

When you’re trying to collect money, positive comments and professionalism can go a long way. Particularly for consumer debts, you need to be careful about legal restrictions on when and how you make contact. For example:

• Don’t say you’re going to sue the debtor if you don’t actually intend to file a lawsuit if you don’t receive payment. 
• Don’t talk to third parties about the debtor’s account.
• Don’t threaten or harass a debtor.
• Don’t try to collect debts directly from a debtor who has just filed bankruptcy (see last month’s article).
• Don’t threaten debtors with criminal charges if they don’t pay the debt.
• Don’t contact debtors directly if you know they’re represented by a lawyer in relation to the debt you’re collecting.

The FDCPA and other consumer laws limit the times of day for collections calls, limit the number of times a call may be placed, restrict the people who can be contacted about a debt, restrict what you can do if you’re asked not to call again, and the list goes on. Mistakes can get you sued.

Get more tips for calling debtors in our latest article.

Learn More from a Trusted Michigan Debt Collection Expert

Have questions about Michigan debt collection, or ready to file a claim? Reach out to the Mullers at (248) 645-2440 or submit a contact form here. If you need a second opinion, check out reviews from our clients!

Contacting Debtors via Phone

What’s the best way to get ahold of a debtor?

Although many technologies exist for instant communication, the telephone is still one of the best. A phone call gives you direct and instant communication with no gaps in time. If you reach the desired person on the other end, they can’t complain about missing messages or e-mails. 

Used properly, the telephone can get you paid in many instances where other forms of communication may not. It’s not just a matter of timing. The manner in which you represent yourself and your company can make a big difference in whether your collection call succeeds or fails.

Perfecting Your Telephone Voice

Develop a “telephone voice” that is a bit slower, lower, and louder than your normal voice. This isn’t to be exaggerated. Your telephone voice helps you pace the conversation while allowing your debtor to clearly hear every word you say.

Getting the Correct Person on the Line

The person who answers the phone may not be the person you want to speak with. Use your credit application or other information from your credit file to ask for a specific person who you know has the authority to pay you. When you’ve reached the point of making collection calls, you only want to speak with a person you know to have the actual authority to write a check and put it in the mail right now. After the right person is on the phone, give your name and the name of your business and make a specific request for money.

Get more tips for calling debtors in our latest article.

Learn More from a Trusted Michigan Debt Collection Expert

Have questions about Michigan debt collection, or ready to file a claim? Reach out to the Mullers at (248) 645-2440 or submit a contact form here. If you need a second opinion, check out reviews from our clients!

Avoid Violating Bankruptcy Law

How do you know if sending a statement is violating bankruptcy law?

If a debtor files for bankruptcy and the debt is being handled by the bankruptcy court or has been discharged, you may be in violation of the “automatic stay” (a court order that comes into immediate effect upon the filing of a bankruptcy action, forbidding collection activity against the debtor). You are in violation of the bankruptcy law if you continue to send notices to the debtor. Be sure to stop the notices, including any that are automatically generated by your computerized billing system. Your automated billing system should be set up to allow you to stop the issuance of any further statements to a customer.

After you write off a debt, you may report the amount to the IRS as a tax loss using form 1099-C. You must provide a copy of the 1099-C form to your debtor, and your debtor may be responsible to pay taxes on that amount as income. Your accounting department or financial professional can advise you about the timely filing of 1099 forms and steps to take if your debtor pays a debt that you’ve written off.

Need Help with Michigan Debt Collections?

If you’re struggling to collect debt from a customer, the Muller Law Firm can help execute the collection and make sure you’re compliant with the law. To get help with Michigan-based debt collections, call (248) 645-2440 or fill out a contact form here.

When to Stop Sending Statements

Do you know when to stop sending statements to customers?

Sometimes it makes sense to suspend sending statements to customers. If the customer is out of business or otherwise uncollectible, sending additional statements is often futile. For example, if the customer is out of business and mail is being returned, you can stop sending statements and mark the account as uncollectible. Save yourself the paper and postage. Billing an uncollectible account waste both time and money.

If the customer has been turned over for collection, sending statements may cause confusion. During the collection process, the attorney will make demands for payment using their own letters, forms, and statements. If you send statements of account, that may confuse the customer about how much they owe and where to make payments. After you’ve hired an attorney for an account, your collector will want to receive all payments on that account.

Need Help with Michigan Debt Collections?

If you’re struggling to collect debt from a customer, the Muller Law Firm can help execute the collection and make sure you’re compliant with the law. To get help with Michigan-based debt collections, call (248) 645-2440 or fill out a contact form here.

Outlining Entity Liability

Why is it important to understand what kind of entity you’re lending to?

In the last blog, we discussed five common legal entities you’ll come across when lending credit. Now, we’re going to outline the level of liability for each entity:

• Individual and personal guarantors: A person who applies for credit, or who signs a personal guaranty of payment for another entity, should be evaluated for credit purposes based upon their personal assets and income. In the event of default on the debt, they are personally liable.
• Proprietorships: The owner of a proprietorship is personally liable for any default on credit terms extended. A proprietor is the owner, and the business isn’t a separate legal entity.
• Partnerships: The owners of a general partnership are personally liable for money owed. Although the partnership entity is a legal entity that may stand alone financially, the general partners (owners) are personally liable to you.
• Corporations: When you sell to a corporation, only the corporation is liable for your debt. The shareholders only become personally liable if they sign a personal guaranty. Exercise extreme caution when extending credit to a corporation.
• Other Legal Entities: State laws allow for a wide variety of legal entities and, as you process credit applications, over time you’ll probably encounter most of them. You may encounter joint ventures, a cooperative venture between two or more legal entities, or the professional limited liability company (PLLC). To protect yourself, evaluate these entities in the same way you would evaluate a corporation.

Need Help from Michigan Collection Services?

No matter what entity you’re dealing with, if they’re not paying, we can help you collect. With our firm, you get a comprehensive package of Michigan-based collection services, including international debt and judgement collection. If you have questions or are ready to place a claim, call (248) 645-2440 or submit a contact form here.