Are Debt Buyers Reluctant To Buy Paper Because Of Regulatory Compliance Issues?

With tens of millions of Americans owing an average of $1400 to $1500 in debt collection, business for collection agencies and law firms is booming.  Purchasing debt for four to six cents of each dollar owed can prove to be quite lucrative.  However, the Consumer Financial Protection Bureau has recently implemented several new regulations.  These regulations may dampen the enthusiasm of buying paper debt for some collection agencies.  Many of the new regulations apply to mortgage lenders but some also apply to regular non-mortgage debts.  The CFPB has produced extensive information in this regard that can be downloaded from the internet.

New Collection Tactics

Because of new consumer protection, collection agencies and law firms are stepping up their “bedside manner” when it comes to collecting debt.  All investors and companies that purchase debt are more reluctant to purchase debts because of the new regulations.    Some agencies are not procedurally equipped to be compliant  rather than just demand payment.  Law firms may be able to deal with such changes because more effectively since they are skilled at reading and interpreting the new laws and regulations than straight collection agencies.  Attorneys deal with many different clients all the time and are therefore more flexible in gauging their assistance accordingly.

Law Firm Vs. Agency

Any new regulation handed down from the government, whether state or federal, is bound to include lots of paper work and even more reading.  Attorneys read, among other things, for a living.  Their eyes and minds are trained to see flaws and benefits in any legal document immediately.  Because of their extensive exposure to legal documents, they are much quicker and much better at adhering to new laws, thus avoiding hefty fines for non-compliance.  Law firms still will be very effective in collecting debt on behalf of their client, the creditor.

Student Loans – When Should A University Commence Suit Action Or Is It Appropriate To Sue Ex Students?

When it comes to collection for student loans and money owed to the university, sometimes the educational institution may find itself with two options.  The first one would be stay with collection efforts or go for suit action.  While you may think that a lawsuit may get the attention of the person more than a collection effort, in reality it is a lot better to stick with collections.  There may be many different reasons why the student has not made the necessary payments for the outstanding amount.  The problem is that not every collection agency will take that into consideration. 

Getting The Attention Without A Lawsuit

If a student has been dealing with the same collection agency, they may not feel as if there is anything else that the collection agencies can do other than to give them an annoying call a couple of times a day.  One good strategy to try to get the attention of the person who owes the money is to switch from an agency to collection law firms.  You are not yet starting a lawsuit against the person.  However, the fact that you are actually talking to collection lawyers may be enough to at least start some start of payment plan. 

More Flexibility

Sometimes agencies will not pay much attention to the needs of the student so it is important that if you use collection attorneys that you use the right ones.  The attorneys should be ready and willing to listen to the needs of the person while at the same time collecting the money that you need coming in.  By actually listening to what the person has to say and what they can actually do, it is a lot more likely that the payments will start coming in.  So before you try to go for a lawsuit, make sure that you talk to collection attorneys first.  

Legal Collections And How To Get More Monies From Existing Judgments Through Asset Searches

People who do not want to pay their debt are often quite accomplished at hiding assets that could satisfy the outstanding balance.  Finding those assets can be quite tricky for the collection attorneys and sometimes nearly impossible for the creditor.  If a debtor moves his assets into different accounts, that should not be too difficult to detect.  However, when the debtor moves monies internationally, it may not only be extremely difficult for the businessperson to find those accounts but it will be an extraordinary feat if he would actually be able to get his account paid.

Discovering Assets Through Internet Searches

Searching for assets may involve anything that has a monetary value.  Assets are frequently in the form of real estate.  Luxury cars or collectible vintage automobiles, yachts, motor boats, airplanes and even all-terrain vehicles can be turned into cash to effect a satisfactory debt settlement.  Collection agencies conduct asset searches on an everyday basis.  It is a valued tool in their profession.  With internet access to an infinite number of specialized sites that track a person’s cash flow through bank account balances and purchases and sales.  Checking the registration of automobiles or other vehicles may increase judgments considerably from the hidden additional assets.

Assets International

Unfortunately for creditors, assets can be hidden all over the world.  It is not unusual to have a judgment against a person of one nationality who has several real estate properties in another country.  Collection lawyers are well aware of that possibility and many are educated and experienced in finding those assets no matter where they are.  The transfer of money has to adhere to strict regulatory laws with full disclosure to the proper authorities if there is an infraction.  Many try to circumvent those rules and regulations by transferring their assets to islands that adhere less strictly to international financial laws.  When an outstanding debt is due to be collected, agencies specializing in recovering those debts will find every asset available for their client.  

Are Consumers Buying Again And Will This Lead To Increased Sales And Thus Increased Collections?

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The economy has slowly been getting better and with the better news from Wall Street regarding unemployment and consumer confidence, it makes sense to say that people are buying again.  The good news for businesses is that the increased number of purchases means more capital coming in, but it usually means that collections efforts will have to increase as well.

People Being A Bit More Careful

Though the purchases are starting to increase they are nowhere near the levels they were before the 2008 collapse.  That is not all good news as a lot of them feel that they need to exercise more care because their salaries have gone down.  In other words a lot of them may face the same problems making the payments that they had in the past, but now they will do so because they have less money to spend.  Do not think of the extra care people are taking as proof that collection efforts will not be needed as much.

Sales And Collections

There is a correlation between the increase in sales and the increase of collection efforts.  That is because the math cannot be denied.  The more sales that you have the bigger the chance that some will default in their payments; it is simply a matter of averages.  That does not mean that you do not want more sales, it only means that a percentage of those additional sales will eventually default, not that every additional customer will. 

Business Owners Should Be Ready

If there is a project that is expected to increase the amount of sales or accounts that your company will see then it is a good idea to be ready for some collections to take place.  You will notice that defaults can start taking place after the first payment for the account all the way until the end of the contract or payment plan.  The collections strategies will be different depending on the account and the amount of default so be ready for all of them.

How Are Holiday Sales Affecting Collections?

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For most businesses, good sales during the holiday season are vital, and a great season can be instrumental for a company to turn a profit for the year.  However, even if holiday sales are exceeding expectations, old debt must still be recovered.  If sales aren’t meeting goals, it is even more important that the process of collecting old debts continues.  Businesses carrying a large percentage of uncollected debt won’t be turning much of a profit for the year, regardless of great holiday sales.

That being said, it is typically harder to be successful with collection attempts during the holidays, as people tend to spend all of their expendable income in addition to running up more debt on credit cards.  Even customers who have been honest in their communications with you may be less likely to answer the phone or respond to written correspondence during the holiday season.  Those who do answer may be full of excuses for making late payments.  While your goal shouldn't be to ruin your debtors’ holidays, you shouldn't feel like Scrooge for trying to recover a debt that is owed to you. 

After the holidays, the number of accounts that are outsourced to collections tends to sky rocket.  Individuals who have spent more than they could afford to during the holidays often find themselves without enough money to pay their household bills and debts.  Overspending during the holidays can take months to recover from, which means you could be waiting a long time for your money if you don’t outsource to collections in an attempt to recover the debt.  An account that was already in arrears may be turned over at the beginning of the new year.  In addition, some customers may have accounts that were in good standing before the holidays, but they may fall behind after the new year.  Despite the holiday season, collection attempts must continue so that your business won’t suffer.  

The Importance of Varied Collection Tactics

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It isn’t enough to simply hire a collection agency that doesn’t use underhanded tactics to attempt to pressure debtors into paying- you need to hire a firm that utilizes a variety of different tactics to increase the chances of acquiring the money owed to you. Tactical variety is important for a number of different reasons.

First, it can be more difficult for a debtor to lodge a legal complaint against a collection agency that uses a variety of low-pressure tactics than a collection agency that hammers them repeatedly with the same tactic. For example, a collection agency that calls their debtors multiple times a day is a much clearer candidate than a collection agency that occasionally calls, occasionally sends a letter, and occasionally makes a personal appearance.

If an agent repeatedly calls a debtor and that debtor never picks up the phone or calls the agent back, it’s clear the phone doesn’t offer a viable form of communication. As such, any agent who persists in calling proves they are simply attempting to pressure their debtors and isn’t attempting to discover a legitimate communication channel with them.

On the other hand, an agent who uses multiple communication channels is more clearly searching for a way to speak with their debtor about their outstanding account. As long as an agent uses a varied set of collection tactics within the bounds of the law, they inhabit a far more legally defensible position.

Varied collection tactics are also more effective than a single tactic, used repeatedly, because varied tactics are more difficult to defend against. A debtor who solely receives repeated phone calls from a collection agent needs to do nothing more than ignore those calls to wall themselves off from taking responsibility for their debts. An agent who uses multiple tactics has a considerably greater chance of getting through their debtor’s defenses and actually making contact. 

Taking Responsibility as a Collection Agency

Collection agencies don’t always have the best reputations, and often with good reason. Many collection agencies utilize a whole suite of underhanded and downright immoral tactics in their quest to receive payment on their accounts. While tenacity is certainly a good thing in the world of debt collection, there’s no need to resort to unsavory tactics in order to close a case. Any collection agency that resorts to harassing, bullying, and applying negative pressure to their debtors is simply proving their lack of expertise in this admittedly challenging field.

Most lenders would prefer to collect from their debtors without their collection representative resorting to these sorts of tactics for a couple reasons. The first of these reasons is moral in nature- most lenders don’t want to be associated with a collection agency that uses tactics they consider underhanded, manipulative or actively insulting.

Yet there is a very good reason why a collection firm shouldn’t resort to acting in such a negative manner- thug tactics rarely work. The more a collection agency attempts to “squeeze” or threaten their debtors, the more that debtor will take increasingly drastic measures to avoid their financial responsibilities. A hefty loan is distressing enough on its own for debtors. Once you add on the constant threats and acts of harassment utilized by some debt collectors you create a negative situation of truly overwhelming proportions.

Considering the fact bullying collection tactics are both distasteful and ineffective, it’s surprising so many collection agencies continue to utilize them. The reason why most agencies stubbornly persist with these tactics is simple- they don’t know any other method to try out. Most collection agencies simply don’t have the training, the experience, or the imagination necessary to figure out a more effective, and less distressing, mode of closing their cases. 

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