Notice from the Feds: Banks Will Be Held Responsible for Third-Party Collection Service Providers Used

At the end of 2013, the Federal Reserve Board released a reminder for all banks and banking institutions that they are held responsible for the actions of all third-party providers and collections agencies they hire, including ARM companies.  The statement advised all banks to take risk management measures seriously when considering the use of third-party collections, as a failure to collect according to increasing Federal regulatory procedures could hurt the reputation and financial well-being of larger companies. 

Also included in the issued guidelines were definitions of what the Federal Reserve Board considers to be a “service provider.”  In its definition, the FRB lists a service provider as any entity that enters into a contract with the financial institution in order to provide business functions or services for that financial institution.  With this definition, ARM firms would be clear-cut service providers, as would collection attorneys or collection agencies hired by larger banking institutions.  Other service providers might be firms offering accounting, loan review, compliance services, auditing and risk management assessments.

By holding financial institutions accountable for the actions of third-party ARM companies and collection attorneys, the Federal Reserve Board has taken an unprecedented move to encourage ARM businesses, collection agencies and collection attorneys to follow all compliance guidelines related to debt collection and legal action.  The loss of reputation and potential fines incurred by a larger financial institution means that they will be seeking only the most informed, professional ARM companies to provide third-party debt collections services.  It just makes better financial and business sense to play by the rules, particularly in the process of collecting on consumer debt. 

This guidance applies to all member banks of the Federal Reserve System, including savings and loan companies and nonbank subsidiaries.  Encouraging banks to closely monitor their ARM vendors keeps debt collection practices in line with new tighter Federal guidelines for collecting.  

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The Ripe Time to Turn Over Collections

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As a creditor it can be difficult to know when it is the right time to turn an account over to collections. Even though your collections efforts may not be coming to fruition, you may have several reasons for not wanting to turn an account over to a collections agent right away. You may not want to spend the extra money on outside collections, or you may simply want to have faith that your clients will eventually pay the debt you are owed. However, at some point you have to face reality and know that a collections agent is required.

But how do you know when the time is ripe to turn over an account to a collections agent? There are several key factors that can help you determine this. First, consider the response you have had from your client. If your client has completely ignored all contact regarding the matter for several months, you need to enlist the aid of a collections agent.

Another thing to consider is how much time your company is spending trying to collect the debt. Time is money. It may be more cost effective in the long run to hire someone to collect the debt for you.

Finally, there are many times during the year that is the best time to turn an account over to collections, because there is a possibility of an influx of money. If your client is a student, there is a good chance that they receive loans and other funds around the end of December and the end of August. These are good times to try to collect on the debt.

Another great time for anyone to collect on a debt is during tax season. People often begin filing their taxes as early as February if they know they will be receiving a refund. Starting the collections process in February and going on strong through May or June will guarantee that you catch your client with their tax refund in hand. At this point, if they do not pay the debt, you know they have no intentions of doing so.

In the end, any time can be the ripe time to turn an account over to a collections agent. It all depends on your resources and your company’s policies on how long a debt can remain unpaid before you take action. Most certainly any debt more than six months old should be sent to a collections agent. These agents can often have the means to collect on a debt that you yourself cannot obtain. 

The Pre-Judgment Phase of Debt Collections – How Law Firm’s Efforts Obtain Better Results

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There are numerous steps a small-business owner can utilize in collecting money owed. A small company owner may start out with letters of notification, and follow up with phone calls to the person who owes the debt. A small business owner may get a response from the debtor and they may pay their debt. Unfortunately, sometimes a business owner may need to hire an outstanding law firm such as the Law Office of Ross Gelfand. Putting a law firm to work for you makes perfect sense. It will increase your leverage and show that you mean business in collecting the money owed to you. 

At the Law Office of Ross Gelfand, they understand today’s economy and that everyone is just trying to get by financially. When the small-business owner has no other alternative, they can hire Ross Gelfand to take pursue the uncollected balance. If they have tried everything possible to collect the debt from the individual and nothing has worked, they may seek a pre-judgment phase of the debt collection process. What that means is that a letter is sent out to the one who has not paid their balance on behalf of the business stating the fact that in a certain amount of days, if the balance is not paid, then the Law Office of Ross Gelfand has no other choice but to seek a pre-judgment in an attempt to get the individual which owes the money to pay the balance. If all else fails then there will be a set judgment against the debtor to recover the amount of money that is owed to the company. 

The Law office of Ross Gelfand is outstanding when it comes to the pre-judgment phase of the debt collection process. They understand with today’s financially trying times. At the law office of Ross Gelfand after everything has been tried: the statements, phone calls, and letters, they will move to the judgment phase of debt collection process on the behalf of the small business owner to start the process of garnishing wages. They understand the struggles of the small business owner, and have the unique ability to handle this type of situation in a professional manner. Any small business owner who has an outstanding amount of debt that needs to be collected should take a look at the law office of Ross Gelfand.

How the FDCPA and TCPA Effect Collections

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The Fair Debt Collections Practices Act, or the FDCPA, and the Telephone Consumer Protection Act, or TCPA, both effect technologically based collections agencies negatively. There are many provisions set forth in these acts that make it difficult for a technology based collection agency to use auto dialers, automated messaging systems, and automatically printed statements or collection notices. These regulations must be followed, yet it is difficult to follow all of them using this technology for collections.

For example, the TCPA mandates that you must provide your name, the name of the entity, and the phone number or address of the entity on any automated messages. This can be detrimental to collections efforts, as people are not likely to return your call if they know who is calling and why.

Another example of how the TCPA negatively affects technology driven collections agencies is that it prohibits automated recordings or artificial voices to call any cellular phone. This is detrimental to technology based collections agencies, because many Americans only carry a cell phone. Home telephone service is becoming a thing of the past. If you cannot contact a cell phone by automated means, you may as well give up on the automated means all together.

The provision about cell phones in the TCPA hurts countless agencies that do not even realize they are calling a cell phone. However, the way the law is written, each offense can cost the agency five hundred to fifteen hundred dollars per occurrence. This is a hefty price to pay for the cost of doing business. No agency can afford it. Therefore, most collections clients cannot be contacted by automated means.

The FDCPA also gives limitations to technology driven collection agencies. For one thing, you cannot contact someone by phone if they request no contact by that means. This cannot happen if you have an automated system, and it can be argued that by not giving someone the opportunity to deny contact you are violating the act.

Another way the FDCPA limits automated collections is by the fact that various statements must be made in every contact. The collections agent must make it clear that the call is from a debt collector, and that any information provided will be used to collect on that debt. Including this type of personal information in an automated call is nearly impossible.

As you can see, there are many reasons why technology driven collections agencies are becoming a thing of the past. Between the TCPA and the FDCPA, there are so many regulations that must be followed that automated systems are nearly obsolete. You may need to consider other means for collecting your debts.