When it comes to collecting past due payments from clients, you may find yourself walking on eggshells. Are you allowed to contact them about scheduling a payment? Are monthly notices too much? Are you being too aggressive or not aggressive enough? Unfortunately, many service providers find themselves faced with these types of questions on an almost daily basis, as it is not uncommon for customers to “forget” to pay for services rendered, or to ignore statements entirely. More unfortunate is that if these service providers do not walk on eggshells, they may find themselves in huge trouble for violating fair debt collection practices.
If you have a customer who has failed to pay an outstanding balance despite your friendly notices, you may be feeling fed up and ready to take drastic measures. However, do not do anything until you fully comprehend debt collection laws, as making the wrong move could have dire consequences for your business. If you are not sure what is legal and what is not, consult with one of our creditors’ rights attorney at Cloud Willis & Ellis regarding your rights.
Understand Debtor Rights
Debt collectors are notorious for using pushy, pervasive, and downright harassing means to collect money owed to clients, which is why debt collection generates the most consumer complaints of any other regulated activity in the U.S. When debt collection practices got so out of hand, federal and state governments stepped in to crack down on collectors and put an end to illegal debt collection practices, hence the Fair Debt Collection Practices Act (FDCPA).
The FDCPA, which officially became law in 1977, protects consumers by making it illegal for debt collectors to use “any means necessary to collect.” From threats of taking consumers to jail to threats of taking consumers’ homes, many debt collectors are not above scaring consumers into paying for debts they cannot afford. Though the FDCPA does not completely stop creditors from employing illegal measures, it does significantly reduce the number of unfair and deceptive trade practices.
The FDCPA generally applies to companies that are in the business of debt collection on behalf of clients. However, that does not mean that innocent businesses that have outstanding client invoices cannot get in trouble over unfair practices.
Deceptive and Unfair Practices That Can Land You in Hot Water
Even if you are simply collecting past due payments on your own company’s behalf, you can still get in trouble for violating the FDCPA. For instance, if you attempt to deceive a customer by using a name other than your business’s name for collecting outstanding balances, you automatically subject yourself to the rules of the FDCPA. One example of a company doing this would be the owner sending out a collection letter with XYZ Collections on the letterhead, instead of the company’s real name, which may be XYZ Construction.
Another tactic that may trigger the FDCPA is using a third party for “dunning” management, which is the process of “methodically communicating with customers to ensure collections of accounts receivables.” The act of outsourcing the management of unpaid invoices is essentially the same as sending invoices to collections, at least in the government’s eyes.
Some other tactics you may use that could cast you in a negative light include:
- Adding fees or interest to the invoice that were not agreed to by the customer;
- Calling the customer at unreasonable hours;
- Confiscating customer property even though you do not have the authority to do so;
- Lying about how much the debtor owes to scare them into making a “partial payment”;
- Pretending to represent the government or to be a lawyer to intimidate the debtor;
- Purposely delaying the posting of payment to the client’s account so that it accrues more interest; or
- Making false threats of any kind, which may include saying that you will have the debtor arrested, or that you will report the debt to the credit bureaus.
If you find yourself using any of these tactics or even thinking about using any of these tactics, take a step back and reach out to an attorney. As a business owner, it can be so easy to take desperate measures to finally get paid, and although that is understandable, it can end up hurting you in the long run.
Talk to an Experienced Attorney About Your Rights
There are several laws out there protecting debtor rights, and even more attorneys who are in the business of ensuring that those rights are enforced. That leaves many business owners feeling vulnerable and at a loss as to what to do when they want to get paid. At Cloud Willis & Ellis, our lawyers make it our business to ensure that creditors and business owners get paid, and that they are just compensated for their troubles. If you have had a hard time collecting on delinquent accounts, schedule a consultation with our creditors’ rights attorneys today.