NFIB

Follow Established Regulations for Debt Collection
03/ 05/ 2002


There are times when a customer's account is so far behind that you have to consider taking action to collect. Many businesses in such a situation consider contacting an agency that specializes in debt collection -- but these agencies frequently charge up to 50 percent of the collected amount, which can eat into any profits that you may still be able to salvage. If you're considering taking action in-house (which means using your staff to collect the debt), you'll need to be informed of what you can and cannot do by law when contacting debtors. Today's Workshop writer Jeff Moses discusses some regulations to follow when debt collection is necessary.

Note that the following information applies not only to when you are trying to collect, but when others are trying to collect from you:

* Federal laws require that debt collectors notify the debtor of the amount of the debt and the name of the creditor before beginning collection procedures.

* Collectors cannot send documents threatening court action to force payment.

* Collectors cannot send documents that look like they come from official government agencies, or from the court system.

* Collectors cannot harass debtors with numerous phone calls within a brief period of time.

* Collectors cannot impersonate an attorney, the police, or a government worker.

* Collectors cannot use a false name, or give false statements to anyone in the process of collecting a debt. Also, collectors cannot give false credit information to anyone.

* Collectors cannot threaten to use the debtor's credit information in any way that could be harmful to their credit or business standing.

* Collectors cannot communicate with any person other than the debtor about the debt.

* Collectors cannot use obscene language in person. on the phone, or in writing.

* Collectors cannot contact a debtor at his or her place of business, or at unusual times (such as in the middle of the night). The hours between 8:00 a.m. and 9:00 p.m. are assumed to be usual, unless a collector is otherwise notified.

* If the debtor has an attorney and has notified you about this, you must send all notification to the attorney, not to the debtor (either via phone or mail).

* Collectors cannot falsely state that the debtor will be subjected to legal action if the debt remains unpaid.

In general, it is best to consult with an attorney about your rights and the debtor's rights before proceeding with collection activities.

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