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How to Stay Within the Law when Pursuing Past Due Accounts

Aug 17, 2007
It's infuriating, to say the least, when your clients don't pay on their past due accounts. While you're debtors may be struggling financially to pay their bills, their lack of payment can be a huge financial blow to a company. Regardless of the steps you'd like to take to collect on your debt, there are very strict guidelines set in place by the Fair Debt Collection Practices (FDCPA) Act that you must comply with or risk breaking the law.

Understanding FDCPA Collections regulation
Each state has different laws surrounding fair debt collections. For example, in Massachusetts, you can only contact a debtor at home about a particular debt twice in any given 7-day period. You can't contact the debtor at a place other than home more than twice during any given 30-day period. What's more, you can't call a debtor's workplace unless the debtor has authorized you to. These are just a few of the regulations-and for only one state.

Those whose clients and/or debtors reside in one or a few states may be able to handle debt collections in house. If handling debt collections in house, it's essential that those assigned to handle the company's debt collection get familiar with your state's Fair Debt Collection Practices Act and implement a plan to stay on top of changes to policy. A wealth of information about Fair Debt Collection Practices Act laws can be found at the Federal Trade Commission website.

Using collection agencies to collect on bad debt
For those who don't have the internal resources to manage a debt collection campaign or who would prefer not to, collection agencies are a cost effective alternative for collecting on bad debt. Collection agencies are responsible for understanding the Fair Debt Collection Practices Act laws in every state and acting accordingly. Since collection agencies don't get paid until the debt is collected, using collection agencies is often a more financially sound and less risky way to start pursing those unpaid accounts.

Some collection agencies not only provide services for collecting debts after they've entered collection status, but for preventing delinquent accounts as well through an outsourced accounts receivable service. With this type of outsourcing, collection agencies act as an extension of your company, using your company letterhead for notices and making phone calls under your name-all while staying in line with the Fair Debt Collection Practices Act.

The most important thing to remember when hiring collection agencies is to ensure that they operate within the bounds of the Fair Debt Collection Practices Act laws. And because any collection agencies that you hire will be acting on behalf of your company, you'll want to ensure that they are ethical and respectful of your debtors as well. Just because the stereotypical image of collection agencies is of a fast-talking bully, doesn't mean that all collection agencies operate in this manner, nor does it mean that it is the most effective way to collect on a debt.

Whether you decide to collect the debt yourself or outsource your bad debts and accounts receivable to collection agencies, its critical to maintain professionalism when contacting your debtors. Consumers today have rights, and enraging them by hiring rude and unethical collection agencies can only make it more difficult to collect on your debt. Even the best clients have rough times and you won't want to lose a potentially great customer over a financial strain today. The ultimate goal with any type of collection is to get the debt paid in a way that is reasonable for both you and your customer.
About the Author
The author is a freelance copywriter. For more information about what a collection agency can do for you, visit www.AABUSA.com.
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