Debt Recovery

A debt collection agency will almost always allow you to make payments in installments. Should a borrower/debtor go for it or not?

Benefits of Paying in Full (in one lump sum payment)

• You will likely strike a deal to settle the debt for a lower amount (keep insisting). Installments result in more work for collection agencies. They would rather accept a lower amount ( like a 10% or a 20% lower settlement) than linger a debt for months. Moreover, if a borrower misseses an installment, it results in even more work for them.
• Peace of mind. The matter is closed, and there are no pestering reminder calls each month from a debt collector.
• If you have cash available or can arrange it, then it is best to close the matter in one lump sum payment rather than dragging the matter. Debt collectors are persistent callers, they get paid a commission on whatever you pay, and they will keep pestering you till the payment is made. 

Benefits of paying in installments

• The borrower who pays in installments has effectively communicated to the debt collector that he does not have a bunch of money sitting in the bank. He is genuinely tight on cash. He can usually settle the deal on the principal amount only and avoid paying any additional interest and fees.
• It gives more time to pay and avoid immediate cash flow problems. 

Benefits of Both (Installments and Full Payment):

• You avoid damaging your credit report.
• No more harassment from collection agencies or their lawyers.

The Russia-Ukraine war will undoubtedly translate to higher consumer and commercial delinquencies. 

Here are several reasons for it:

• Due to higher gas prices, everything has become expensive. Consumers need to shell out money on essential goods (like food, gas, clothes, expenses related to kids, etc.), and debt is something most people tend to put on the back burner. 
• For the majority of the American population, salary increase has failed to keep up with rising inflation. 
•  Commercial businesses have also been struggling with supply chain issues due to the covid restrictions in China; further increase in input costs due to the Russia-Ukraine war has resulted in severe financial stress. They are either not able to produce goods in required quantities or not able to always pass the increased costs to their customers.
• Many analysts predict that we are on the verge of an economic recession, the job market that has been very healthy so far can very well break the trend as corporations and small businesses may try to cut costs by laying off employees.
• Many people are saving money in cash, citing uncertainty.

The urgency for medical practices and small businesses to protect themself against unpaid bills is crucial. Before the financial situation of your debtor becomes worse, it is highly advisable to hire a collection agency and attempt to recover your money. The probability of recovering receivables goes down drastically each month, therefore prompt and intensive steps are sometimes necessary.

 

We all agree that healthcare costs in the USA are extremely high.

Most doctors (and dentists) who do private practice, struggle to cope with never-ending government regulations and mandates, a constant fear of frivolous lawsuits, dealing with insurance companies, and loss due to unpaid patient bills. The medical profession is among the most stressful careers out there.

Anyway, back to our core topic of medical debts and credit reporting of medical bills, and here are our own thoughts on this.

Reporting all unpaid bills, regardless of the balance, to credit bureaus as the final step does two main things

1. Inform future creditors about bills on which a person has defaulted so that they can access their own risk to lend money to that person or not.
2. It gives a chance to the borrowers to pay off their bills so that the concerned credit report entry can be marked as “Paid in full”. Paying off reported bills helps borrowers to improve their credit score than leaving them unpaid.

But all this is changing only for medical debts.

Credit bureaus will soon stop reporting medical debts lower than $500, remove medical line items that have been fully paid, and collection agencies now have to wait for 1 year before medical debts can be reported.

In the last few years, there has been a pushback on how medical bills are reported. These include government rules, credit scoring models and even credit bureaus. They all have come out with their own ways to create roadblocks for medical credit reporting.

Shouldn’t all unpaid debts ( medical or otherwise), be reported to credit reports in the same way?
Then let the lenders decide which one they want to consider or ignore.

Forcefully suppressing unpaid medical debts from credit bureau reporting will certainly result in many unintended consequences.

•  Fewer patients would be willing to pay their medical bills in full. Even those who can pay may decide not to pay in the future.
•  The cost of unpaid bills will be passed to patients who can pay, and procedures that have a higher chance of getting paid.
•  This also means that cost of medical treatments will increase gradually.
•  Some medical practices may try to intentionally inflate the cost of certain treatments so that accounts receivable from patients is over $500 so that they can be reported to the credit bureaus.
• On the other side, even patients may very well pay a portion of their medical bills so that the outstanding amount is less than $500. Now default on the remaining amount since there is no risk of credit reporting for amounts lower than $500.
• How is medical debt different from any other bill? Why defaulting one type of bill is less different from other kinds of bills. Isn’t this increasing the risk for future creditors who will lend money to the patient without knowing that patient had unpaid (medical) bills in the past?

For example: What if a patient who owes $10,000 in medical bills wants to take a $500,000 home loan. He calculatedly pays his old $10,000 medical bill so that it can be removed from this credit report. Now he can qualify for $500,000 loan. Wouldn’t this increase the risk of the bank/credit union with whom he takes that mortgage?

Suppressing the way medical reports are reported to the credit bureaus will surely increase the cost of healthcare, more defaults, more legal mess, and higher risk for future creditors.

The first step in shortlisting a collection agency is to ask them to submit a Request-For-Proposal (RFP) so that you can pick the best collection agency at the best price.

Here are the most important points to include in your RFP questionnaire.

1. Is your collection agency nationally licensed or not? (If not, which all states are you licensed in?)
2. What services do you offer – Check all those which apply (Collection Letters, Collection Calls, and Legal)?
3. What are the fees for each service and method of payment?
4. Do you have a secure portal for submitting accounts? Do you have any security certifications (Like SSAE / SOC / HIPAA etc?)
5. Can the accounts be uploaded in batch using an excel spreadsheet?
6. Can you provide references (or names) of existing clients similar to our company? What is your average collection rate for our industry?
7. Are your debt collectors regularly trained for debt collection laws like FDCPA/TCPA/HIPAA/State Legislation?
8. What if the remittance frequency for the amount collected by the collection agency?
9. Do you provide monthly collection status reports for all accounts?
10. Which subcontractors/vendors are involved in performing your services? Do they also handle the debtor data securely?
11. Are any of your company operations located overseas, or are you a 100% USA-based company?
12. In case of a debtor dispute or litigation, what is your procedure? Do you have liability insurance against such disputes?
13. In case of service issues, who will be our point of contact from the senior management?
14. In case of disagreement, are we allowed to withdraw all our accounts from you? Are there any exceptions?
15. Do you offer both B2B and B2C collections?

 

By law, all debt collectors are required to provide at least 30 days to the debtor/consumer to dispute the debt, after the consumer receives (or is assumed to receive) the validation information. Most collection agencies will add about additional 2 weeks to account for mailing delays and holidays.

This format is located here:
CFPB Debt Collection Validation Notice R19  ( as of Nov 2021)
https://files.consumerfinance.gov/f/documents/cfpb_model-validation-notice_2020-12.pdf

These are the standard options available to dispute the debt:

Check all that apply: I want to dispute the debt because I think: * This is not my debt. * The amount is wrong. * Other (please describe on reverse or attach additional information). * I want you to send me the name and address of the original creditor.

Collection agencies not following this exact format risk safe-harbor and may possibly get sued by attorneys.

They may additionally add page 2 which essentially says:

This notice is to inform you the consumer that this debt was assigned to ABC collection agency and they will not take any action from XX days from the date of this letter. 

( XX days can vary depending on the policy of the collection agency – Say 45 days or 60 days)

 

 

Inflation translates to higher accounts receivable and unpaid bills. Wage growth does not keep up with rising prices for most people.

Whenever there is a spike in inflation, interest rates rise. This translates to higher delinquencies for credit card bills and more people unable to pay their mortgage. People divert their finances towards more necessary expenses like food and rent over other bills obligated to pay, but feel they can be deferred.

Doctors suddenly see more patients defaulting on their payment plan. More people are unable to pay their car installments. A higher number of people are file for bankruptcy. The list goes on.

Nearly 50% more people face problems whenever there is a significant rise in inflation. They are now paying more for food, fuel, and almost all essential things people need in day-to-day life.

To improve your chances of getting paid during inflation, it is important to recover your share before your debtor’s financial condition deteriorates further. So whenever your AR is over 60-90 days past due, hire experts – Hire a collection agency.