When Do You Need A Collection Agency?

Business owners are often faced with the enormous task of settling accounts and collecting on late payment or nonpayment. In times of economic struggle, this can be the most difficult part of running a business, but a necessary part if that business is to be a success.

 

Deciding whether or not to place your accounts with a collection agency is a likewise daunting task.  However, many analysts agree that financial problems show themselves in patterns, and there are particular signs you can look for to determine whether or not the timing is right to place an account with a collection agency.

1)      If a customer is fairly new, has had an account with your company for less than a year, and fails to respond to any invoices or statements that you send out, that customer should be sent to a collections agency as soon as possible.

 

2)      Your payment terms don’t work, regardless of how fair they are. If you offer reasonable payment terms (even for someone facing economic hardship) but your offers still fail to meet the customer’s ability to pay, then that customer might be playing games and might be determined to simply not pay.  If so, you should get rid of that account as soon as possible by handing it over to a collections agency.

 

3)      The customer starts denying responsibility for the debt.  When a customer begins denying that he or she is responsible for the debt, it is time to hand the account over to a professional. Without professional debt collection help in cases like these, the collection will be too time consuming and costly for your business to handle.

 

4)      The customer is getting separated, divorced, or has marital difficulties.  Debt problems almost always follow marital problems.  If you are aware that a customer has marital problems, it is best to send that account to a professional that will be able to handle the address changes, phone number changes, and financial instability that will likely follow for that account.

Is there a possibility of a student loan debt bubble?

Are We Headed To A Student Loan Debt Bubble?

The economic struggles of the past five years have seen a housing bubble that might be followed by a student loan debt bubble, according to Standard & Poor's. “Student-loan debt has ballooned and may turn into a bubble,” S&P stated.  “There are more defaults and downgrades for some student loan asset-backed securities."

Mark Kantrowitz, publisher of FinAid.org, an educational loan and grant website, states that Federal and private student loan debt has surpassed credit card debt.  At just under $1 trillion, student loan debt presents a different angle in the asset backed loans problem of the recent few years.  The angle is the government has a large amount of money at stake, making it nearly impossible for creditors to have their student loan debt discharged through bankruptcy.

As an increasing number of people have suffered in some way through the economic downturn – either through job loss or life circumstances – the Obama administration is seeking ways to fix the growing problem that could, indeed, be as significant as the housing bubble that burst.  The same factors that caused the housing bubble are present in the student loan crisis.  With state aid being taken away from many colleges, funding has decreased, causing rising tuition costs.

 

Also, in previous years, practically anyone could get a student loan as part of government-backed encouragement for everyone to pursue higher education.  Not only were applicants given easy loan money – they were given money through the loan for living expenses, books, and whatever they wanted to spend the money on.  Applicants with un-established credit histories, or even poor credit histories, were given student loans at low rates, and now many of these applicants find themselves $50,000 - $200,000 in debt, despite increasing competition for jobs, especially among professionals.

When does my business absolutely need a collection agency?

Can Debt Collectors Contact You via Social Media?

The Fair Debt Collections Practices Act (FDCPA) was designed in 1978 to protect consumers in debt collection practices.  Although the Act was written before Facebook and social media became the powerhouse it is today, it is still applicable to collection practices conducted through these methods.

 

According to Michelle Dunn, an author and 24-year veteran of the debt-collection industry, many collectors do try to set up a fake profile and ‘friend’ someone in order to find out more information that is relevant to their debt collection, such as employment, cell phone number, etc.  However, this practice is illegal in many states and Dunn discourages it because it involves impersonation.

 

The FDCPA doesn't explicitly forbid collectors from posting on your Facebook wall or Tweeting your relatives and friends to ask about where you are. However, when your privacy is violated, there are federal statutes that are broken, and the FDCPA does explicitly protect you from breech of privacy.

 

If you don’t want your social media information to be used by creditors, experts suggest the following steps to take:

1. Don’t avoid creditors.  If you don’t want to be contacted via mail or phone about the debt, simply return a letter to your creditor stating that you no longer wish to be contacted via a certain method.  They will be forced to comply, although they will be more inclined to sue at that point to recover the debt.

 

2. Use your privacy settings. Some people have their Facebook profiles set to completely public, allowing anyone who wants to access your profile full ability to do so.  If you are concerned about privacy and about creditors finding out information, then set your profile to completely private.

 

3. Avoid posting disclosing information about your job or cell phone number.  If you owe money and don’t want to be called by collectors, don’t allow this information to be public on your Facebook profile.  

Is there a possibility of a student loan debt bubble?

Obama Relies on Debt Collectors Profiting From Student Loan Woe

With $67 billion of student loans in default, the Education Department is turning to private debt collection companies to recover student loan money.  In fact, the Education Department has already held meetings with consumer representatives to discuss the considerations of requiring debt collectors to offer payments based on income to defaulted borrowers who qualify. 

In a phone interview for Bloomberg News, Justin Hamilton, a spokesman for the Education Department, said, “We want to make sure we are striking the right balance between helping borrowers who have hit hard times and honoring our responsibility to be good stewards of taxpayer dollars.”

Student loans can rarely be discharged, even in bankruptcy.  This makes it difficult for borrowers to escape the debt, especially compared to debt from credit cards.  However, as an increasing number of borrowers have been hit with job loss, unforeseen medical expenses, and otherwise devastating economic circumstances, the government is working to recoup its money while helping the thousands of Americans who have met economic loss and are unable to pay their bills.  Since the government has funded many student loans with tax payer dollars, it can confiscate tax refunds, paychecks, and Social Security payments. 

   

Under these contracts between debt collectors and the Education Department, a defaulted student loan can be “rehabilitated” if a borrower makes nine payments in 10 months. These payments must be .75 percent of the loan’s total each month.  Collectors who are able to achieve this result from borrowers can make up to a 16% commission on the total amount of the loan.  If they are unable to achieve this amount, they are generally given a $150 administrative fee to hold the account and continue collection efforts on it.