The golden rule of thumb for granting credit is to “cash it when you do.” Collections are the single most important part of the credit industry. You must convince the borrower why he should pay his bill and why he should stay current when he enters into the contract.
One of the most important factors in collecting your account is that the borrower knows that you are in good standing and have good credit. When you need another purchase, you’re more likely to get that order because your account is in good standing. The borrower does not want to go through the credit check process and is at risk of being turned down.
law collection
Not all companies like the task of making collection calls. It is an unpleasant task to extend credit. You should remember that there are laws that control the ways you can collect and when. The Fair Debt Collection Practices Act (FDCPA) is a federal law that outlines the ways you can collect your accounts. This act is universal in all 50 states. You may not use abusive, deceptive or unfair debt collection practices. You must use your own name and you cannot claim to be a lawyer unless you are. If you contact a third party for information such as an address, phone number, or place of employment, you cannot tell them that the debtor owes you money.
It must detail the amount owed, who to contact, and what action to take if the debtor is disputing the debt or a certain part of it. If the debtor sends the collector a letter disputing the debt within 30 days, the collector must stop contacting that part of the debt until they send proof of the debt. Then collection efforts can continue. In addition, a collector may not contact a debtor after receiving a letter from the debtor directing the collector to cease its efforts. But the collector can continue to work for him through a lawyer or by filing a lawsuit.
Suggested methods for collecting
A good collector never loses his composition with an account. He must communicate in a very professional, friendly and compassionate way. He never uses profanity or misleading statements. Never threaten a borrower in any way, whether by verbal or material means. Never joke about a collection. Always use his real name and be available when that borrower calls, never forgetting that he must convince the Borrower that he should pay him.
It is helpful to analyze why an account has become delinquent and requires collection activity. Let’s look at a couple of reasons. The most common reason is that the Borrower has overextended its repayment capacity. This can happen due to uncontrolled purchases or due to a condition beyond his control, such as illness or an accident. You should remember that if the borrower had sufficient funds available, the account would probably not be in default. However, late payments could also be caused by a problem with your product or service. You must determine why an account has become delinquent and work with them to bring it down to a zero balance.
If the delinquency is caused by an uncontrollable spending habit, it is addressed in a firm but compassionate manner.
start payments
It is very important that you get the debtor into the habit of paying monthly again. Since there are not enough funds available to make your regular payments, please try to reduce them to an acceptable payment amount that can be made on a regular basis. Receiving money each and every month is essential in collections, particularly when the account is more than 90 days past due. You must make the payment amount greater than the interest charges on revolving accounts. The debtor will eventually pay the balance. Because interest is charged monthly, the payment amount must be enough to pay the interest and a portion of the principal balance. Only then will the account have a payment lifecycle.
If there is a dispute, you should investigate the reasons and substantiate your account as soon as possible so that the debtor can continue to pay. If the delinquency is caused by uncontrolled purchases, you should arrange for a smaller payment, but it is important that one payment be made every month. If you skip a month, you should firmly but politely discuss the reason for skipping that month. Many debtors who cannot pay the full payment will not make any payment. They think they can’t pay less than the regular scheduled payment amount, so you get nothing more than partial payments. It is better to receive a partial payment than no payment. Many people cannot accumulate enough money to pay once a month. Take payments either weekly or biweekly. The most important part of collections is getting the Debtor used to paying again.
Take a personal interest in that account and make encouraging comments when you get paid. With CreditStar you can insert a personal message in the description line and it will print on your next statement. For example, you could say:
“Thank you for your payment”,
“Your special effort is appreciated”,
“I know how hard you are trying to clear this balance, THANK YOU”, or
“You’re doing great, thanks for the payment”,
You can probably come up with many short statements to fit the situation. Words of encouragement and recognition are a great support for the collection of accounts.
