Do's and Don'ts

of Debt Collection

Follow These Tips to Avoid Fines

 

By Alvin Hattal

(Published in My Business magazine)

 

Do you lose your cool when you're trying to collect money on past-due accounts? Be careful. You can be sued for overly aggressive debt-collection attempts, even if you've turned the duties over to a collection agency. More and more businesses are being sued for violating debt-collection statutes themselves, or because of the mistakes made by the debt collectors they hire, commonly known as "vicarious liability."

Alan Reffkin, a former FTC senior trial attorney, says there are more than two dozen dangerous traps for creditors and collectors. Some are well known to business owners, many are not.

What you can't do:  

  • Use a postcard to communicate about a debt, because the information might be seen by someone else.
  • Threaten any action, legal or otherwise, unless you intend to follow through on that threat.
  • Call a debtor at inconvenient times, generally defined as before 8 a.m. and after 9 p.m. For consumers, the allowable period may depend on their work schedules.
  • Contact a debtor at work where the company prohibits such calls.
  • Continue to communicate with a debtor after receiving a written notice asking you to stop.
  • Pretend to be a collection agency.

Surprised by what you can't do? What is allowed may amaze you too. You can use an alias as long as you don't impersonate an officer of the law, a private investigator, a friend of the debtor or someone else, according to the Commercial Law League of America. You can also accept a post-dated check, but certain restrictions apply. If the check is post-dated more than five days, you must notify the debtor in writing three to five days before depositing it, says Noelle Schaffer of the Association of Credit and Collection Professionals.

Bone up on the Federal Fair Debt Collection Practices Act, available on the Federal Trade Commission's Web site at www.FTC.gov. It's full of traps involving invasion of privacy, defamation, libel, slander and other violations.


Next time your blood pressure rises during debt-collection duties, remember: Getting caught at fault may cost you more than the amount you're trying to collect. Violators of collection laws can be fined up to $1,000, plus actual damages, along with reasonable attorney fees as determined by the court. Make sure your outside agent doesn't go too far either.

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