If your business relies on billing to collect customer payments, you've probably tried to come up with creative ways to notify people of the money they owe. Using phone calls is a tried and true method, but new government regulations and the pervasiveness of caller ID on smart phones has made it easier for consumers to screen out calls from people they don't want to talk to. Where else might a business turn to notify a customer of their required payment?
Debt collection can be a time-consuming process. The time needed to track down customers with unpaid bills uses up valuable resources that could be better served operating and growing your business.
Third-party debt collection agencies are not immune from regulation, regardless of how their efforts may feel to consumers. Collection agencies have a reputation for aggressiveness, in large part because their own financial health depends on how efficiently and fully they can collect from those who owe money. But those aggressive tactics may ultimately end up benefiting consumers. That's because lenders that are able to recoup their losses have more money on hand to extend as credit. When lenders lose money to delinquent borrowers, they have less money to extend to anyone, including those with good credit scores.
When the Fair Debt Collection Practices Act was first passed in 1977, a distinction was made between those who are collecting on debts owed to themselves and those collecting on behalf of other entities. The idea was that creditors who collect on their own behalf are more likely to behave. They are far less likely to use deceptive or abusive tactics, the argument goes, because the debtor is their own customer.
When a person has a significant amount of debt, they often find themselves in a heightened state of vulnerability. In an effort to respect every individual's circumstances and to prevent fraud, the Internal Revenue Service has tried to remain transparent in their processes.
Debt collecting is an intensive process that keeps you away from doing what you do best: running and growing your business. It does not help that there are so many rules that need to be followed. If you make one misstep and fall onto the wrong side of laws like the Fair Debt Collection Practices Act (FDCPA), you could seriously damage your business.
In the quest to collect a debt, one of the most common tools is the debt collection letter. However, the content of that letter must be carefully crafted in order to ensure it adheres to the Fair Debt Collection Practices Act (FDCPA). An article from InsideARM demonstrates how a novel attempt to collect a debt can land a debt collector in hot water.