When your business has delinquent debts, you may need help. Your law firm might be able to assist you in collecting money owed on past due accounts, unpaid promissory notes, judgments and other debts. In many cases, the prospect of legal action by a law firm results in quick recovery of money owed to your company, without having to file suit. In other words, a properly-drafted attorney’s letter can get more attention and results than a number of collection calls.
Legal Aspects to Check Out if Using a Collection Agency
Attorney affiliations. A credit collection agency should be affiliated with lawyers who have expertise in creditor rights and commercial litigation. Legitimate agencies are associated with the Commercial Law League of America (CLLA) and the National Association of Retail Collection Attorneys (NARCA).
Attorney involvement. What criteria are necessary before referring a case to counsel? Insist that an agency seek your permission before making such a referral. Also, make sure you are consulted and given final approval whenever a settlement is made by a debtor. If the case is litigated, be aware that you are usually responsible for court costs and your collection agency’s commission fee is likely to increase.
Professional treatment. Since a collection agency is your authorized agent, the actions of its representatives reflect on your company. In addition, there are laws that protect consumers against harassing phone calls from debt collectors.
Make sure that all contact is handled professionally. Insist on proper treatment and get confirmation that the agency handles cases in a dignified, legal manner.
Other advantages to using a law firm: You work directly with a collection attorney, not a third party, if litigation does become necessary. Attorneys know what is legally allowed when it comes to collection — and what is prohibited under federal and state debtor-creditor laws.
Of course, a collection agency is another option for collecting bad business debts. When considering that route, be sure to choose a reputable firm and look at these issues:
Good references. Ask a collection agency for credit references, and check them out.
Payment policy. The collection agency should deliver money to your company no later than 30 to 45 days after receiving it from the debtor.
Forms and reports. An agency should provide you with account placement forms and reports, which reflect the accounts you placed with the agency. These documents should be provided to you immediately and help you keep track of all accounts placed with the agency.
Typically, the forms should list, in addition to the creditor’s information, full details on the debtor, such as name, address, telephone and fax numbers, e-mail, contact person, the amount due, and any known reason why debtor is not paying. These documents ensure that an agency properly logs your accounts. Request samples before deciding on an agency.
Account status reports. An agency should provide you with account status reports that explain what stage of collection your accounts are in. Examples include partial payment arrangement, settled in full, paid in full, bankruptcy, or litigation recommended. These reports should be sent to you at least quarterly.
The agency should notify you whenever a possible settlement is offered by a debtor. It’s also essential that the agency’s authority to settle is clearly understood by both parties. Request that a sample status report be provided before you place any claims for collection.
Communication with the agency. Make sure you can reach a human being when calling to discuss your accounts — not a recording or answering machine.
Bottom line: When it comes to collecting past due accounts, your business wants to collect the maximum amount of money as quickly as possible. Our firm can help you decide the best way to accomplish that goal.