Have you ever wanted to know the real story behind the debt collection industry? Want to get the inside scoop on how things really are in the world of debt collections? We got you covered here!
There are untold amounts of myths regarding collection agencies and how they operate. And even more myths about how they interact and work with consumers. So we thought we would share a little bit of inside baseball when it comes to debt collections and debunk many of the myths that people share.
Think you know everything about the debt collection industry? Our team dispels four more myths about debt collections below.
A debt must be over ONE year old to be sent to collections-FALSE
Many consumers believe that they cannot be sent into collections unless they have gone over a year of nonpayment. And many businesses believe this to be the case. When we talk to businesses, sometimes they believe that until their customer goes at least one year out on their obligations, they can’t do anything. That is simply not true.
The fact is, a business can send a customer into collections at any point. There is no set time frame for assigning a past-due debt to a collection agency. It all depends on how the business would like to handle its accounts receivables, how assertive its comfort level is in getting its customers to pay, and how debt collections support internal payment procedures.
Commonly, a business that has well-managed internal procedures when it comes to accounts receivables will begin the process when an unpaid bill reaches 60 days past due.
A business needs a customer’s consent before sending them to collections-FALSE
If you are a business reading this, understand this important fact. You do not need permission from your customer to initiate any collection activity.
If that were true, nobody would be sent into collections.
If a customer has not paid a business, that organization has every right to follow up with that customer and initiate third party collection activity. Of course following up with tact and respect and using an agency that does the same is critical, but you do NOT need permission to send a customer to debt collections.
A business needs a signed contract or agreement to implement collection procedures-FALSE
While a signed agreement with a client or customer certainly helps legitimize the debt, it is not required to send anyone into collections. If you have provided a product or service to a consumer or business, sent an invoice and can document that, you can send someone into collections for non-payment.
Keep in mind that under the FDCPA Fair Debt Collection Practices Act, a consumer is afforded the benefit of receiving validation of any debt. In other words, when you send someone into debt collections and they ask for validation, legally, it must be provided to that consumer.
Because of this, it is important for a business to have some type of documentation procedures, work orders, purchase orders or any other type of paperwork that provides a paper trail for a business transaction.
It’s also a wise business decision to make sure that customers are fully aware of payment expectations right up front. This goes a long way in eliminating disagreements about how and when your business should be paid. Does it stop late and non-paying customers? Of course not, but it provides an additional layer of documentation that you may need later.
A debt collection agency is only HIRED to collect money-FALSE
Of course a business works with a debt collection agency to recover money that has not been paid. But that would not be telling the whole story. And it certainly would not offer a complete picture of the role of collection agencies.
The role of a collection agency is to bring that consumer to the table and to create a resolution to the debt. And, of course, they are hired by the business to do so. But smart businesses hire collection agencies that can also help them preserve the relationship they have built with that consumer.
If a business hires a collection agency only to collect debt, they are not taking advantage of what a professionally trained collector can do for them. Arranging to have a debt paid and using tactful and diplomatic approaches can preserve future revenue for that business. In some cases, that’s not attainable with internal resources and they require a third party to assist.
Remember, a debt collection agency can actually save customers for a business and improve the relationship in the long run.
There are many myths about debt collections out there and even more in the public forum so it’s important for everyone to understand the real stories about the collection industry and we’ll continue to dispel those myths here at American Profit Recovery.