Are Government And Municipality Collections The Area To Focus In As Debts Mount For Cities And Towns?

Image courtesy of  Pat Hawks

Due to the limited number of personnel and the enormous amount of work to be done in all facets of city and town business, it is often difficult for these entities to collect unpaid taxes, fines, and other debts owed by citizens.  However, every unpaid debt, regardless of the amount owed, affects the city or town’s operating budget to a degree.  With states cutting the budgets of local governments more and more each year, it is important that as many debts as possible are recovered. 

Government and municipality collections may be the area to focus in as debts continue to mount in cities and towns.  With a provider of collections to continue collection efforts on their behalf, local government agencies can focus on their daily business.  While some debtors may find it easy to disregard correspondence from their local government or municipality agency in regards to a debt, collections services can be much more effective.  One reason for this is the amount of time and effort that a collection service can put into collection attempts.  Town and city governments are limited in the amount of time they can put toward making phone calls and writing collection letters to recover debts, but this is not the case for a collection service specializing in such matters. 

With the focused collection attempts provided by a collection service, the debtor will not be able to ignore the collection attempts, which were likely more limited and sporadic when provided by local agencies.  When the debtors realize that the matter of their debt is not going to be dropped, they will be more likely to pay the debt.  The push from a government and municipality collection service may be just what is needed to get the debt settled.  Although it is not likely that every debt will be recovered, the percentage that are will be a boon for the city or town’s budget.  

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.  

What are some of the reasons government and municipalities end up with large amounts of debt?

33% of Shoppers are Increasing Their Debt This Holiday Season

While holiday shoppers are showing signs of decreased spending and more control of unhealthy spending habits, 33% of shoppers are still planning to increase their debt this holiday season.  According to a Accenture’s annual holiday consumer spending report, survey results show that consumer expect to spend an average of $582 on their holiday shopping lists and 23 percent plan to spend more than $750.  Over half (52%) expect to increase their spending from last year by $250 or more.

The good news is that according to the survey, most shoppers are better prepared for their spending this year than they were last year, with 51% saying they will pay cash for their purchases.  However, there is still a large number of consumers who state that they will put their purchases on a major credit card—33%, in fact.  This is still one-third of consumers who plan to add to their consumer debt this holiday season. 

According to Chris Donnelly, managing director of Accenture’s Retail practice, “The research illustrates a shift in U.S. consumers’ approach to their holiday spending.  Many consumers are still struggling to balance their household budgets, at the same time that pay raises and bonuses remain in short supply, and they are realizing that this is not a short-term phenomenon.  Consumers will remain resistant to the impulse purchase, and retailers will have to work harder to secure that extra spend by having a unique product, service or experience, and being clear on the value to the customer.”

Some of the ways consumers are coping with having less money to spend and attempting to spend money more wisely include an increased amount of online shopping, where items can often be found at better prices.  Shoppers are also taking more advantage of discounts and promotions offered by retailers in an attempt to lower their overall spending during the holiday shopping season. 

Much of Student Loan Debt is Not Being Paid Back, According to a Recent Report

The percentage of unpaid debts in the U.S. isn’t nearly as dismal as it was a few years ago—or even last year—except for one type of debt: student loans.  While the percentages of total consumer debt fell this year, as well as delinquency rates for that debt, student loan debt has been steadily growing for the past 8 years, with delinquency rates on the rise, as well.  In whatever way you look at it, the outlook isn’t a positive one.

From a report released in September, outstanding student loan debt now totals $956 billion and is still rising.  Approximately half of that amount is new student loan debt that is being taken on, while the other half is defaulted loans that are now showing up on credit reports across the country, affecting the credit of thousands of Americans.  It is now calculated that some 11% of student loans are now 90 days delinquent, which is considered “serious delinquency” by most credit standards.  In addition, many student loans are in deferment based on the debtor’s circumstances or continued enrollment in school, so these rates could be even higher once deferment periods end.  Since deferment is a limited prospect, it remains to be seen what will happen when it ends for the hundreds of thousands who have taken out more in student loan debt than they can afford to pay back. 

Since student loan debt is one of the few types of debt that cannot be discharged in bankruptcy, it remains to be seen what effect student loans will have on the economy if the default rate continues to rise.  Meanwhile, collections agencies and collections attorneys are watching closely to see just what role they will be playing in the process and whether student loan debt will be the next big debt bubble to hit our nation.  

What should my collections agency use automated software and how will it help us run more efficiently?

When Using a Law Firm to Collect Unpaid Debts Makes Sense

Let’s face it—consumers who have failed to pay their debts and are who are past the point of worrying what it will do to their credit aren't going to always pay attention to collection calls and letters, particularly if they have lost a job, changed their phone number or moved.  In situations when you have tried every method of communication possible and the debtor still refuses to work with you, it might be time to use a law firm to collect on the unpaid debt, especially if the debt that is owed to you is a significant amount of money.  

  

First of all, a letter or phone call from a law office tends to carry a lot more weight in the mind of the debtor than a letter from a collection agency.  Since most collections agencies have their calls and letters on an automated process, while the communication might be sternly worded, most will not go through with judgments or lawsuits in order to receive payment.  A lawyer, however, is fully prepared to initiate a lawsuit on your behalf when the debtor refuses to pay or make payment arrangements. 

This is why lawyers who specialize in debt collection are more much more effective than a collection agency tends to be.  Therefore, if the debt is significant, you should hire a debt collection attorney.  When you do hire a lawyer, you should be prepared to show up in court and go through the entire legal process (including court fees and retainer fees) to collect on the debt that is owed to you. 

However, using a law firm is usually a last ditch effort because law firms often demand a 50-50 or one-third split of the collected debt.  Also, since lawyers tend to handle specific types of debt collection cases, it might be difficult at first to find the right attorney who specializes in the types of debt owed by your nonpaying clients.