Best Practices For Collecting Debt Owed
Debt Collection Practices refer to the way an individual or licensed Collections Agent goes about trying to collect money and goods owed. Whether debt collection is done within a business in the Accounts Receivable department, or within a Collections Agency, the rules are the same. Both must follow the Fair Debt Collections Practices Act (FDBCA).
Debt Collection that is legal and fair involves information gathering about the debtor and the bill owed; and determining whether interest and late charges applied are fair and reasonable. Sending out a demand letter, outlining the intention of collection is usually the first initial contact of collections, followed by a telephone call once the letter has been received.
If a debtor does not respond to these initial attempts at collection, a further series of letters, each in stronger legal language than the next, are sent. These letters are often referred to as ‘dunning' letters, and can be done by either a business owner or Collections Agent.
Debt Collection practices include doing credit checks, using Government State and Federal databases to determine solvency of a debtor, and using the Master Death Index to determine if a business should pursue a lien against an Estate.
A further example of debt collections practices, include agreeing to discount the original invoice, if a debtor is willing to settle. Sometimes, this may be the only way to get any money or goods at all.
If a debtor cannot be located, often the debt collection practice of skip tracing is performed, usually by a Collections Agent or Collections Attorney.
Sometimes, as a last resort, the debt collection practice becomes debt collection litigation. Here, a Debt Attorney uses the information on a bad debtor to prepare an Originating Notice to be served. Once served, a Court date for discovery and litigation is prepared, and if successful the last step in debt collection is securing and enforcing a lien or judgement and supervising repayment of the debt.
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