The most basic premise of business is that a business needs to get paid for the products or services they provide. Most of the time, this is not a problem and customers pay either before the transaction is finished or shortly after. However, there are occasions when bills are not paid on time or at all. In these cases, businesses have two options. They can pursue the debt themselves, which takes time and more many they may not have or want to spend, or they can turn the debt over to a debt collection agency. In this case, one of the most important things for a business to consider is that they are selecting an ethical debt collecting agency. If not, it can lead to the debt not being collected or worse, legal issues for the company. Here are the reasons why it is so important to select an ethical debt collection agency.
Why Ethical Debt Collection is Important
The biggest reason that selecting an ethical debt collection agency is so important is that, like any other vendor you work with in business, they are a reflection of you and your company. A rude debt collector may not only ruin your own company’s reputation, but after a rude conversation most debtors would become adamant and angry and would not even pay even if they had means to clear the bill. Highest performing debt collectors get results by working amicably with debtors, not against them. Harassing a debtor is against the Federal laws anyway (FDCPA Laws).
Online reputation. In 2020, the internet makes business incredibly transparent and connected. If someone is the victim of unethical debt collection practices, there is a good chance they will put that online (Google or Yelp reviews). This can severely damage the reputation of your business and become one of the first things people see when they Google your company. Remember, the debt collector is collecting a debt incurred with your company. This means that if people get upset about the practice and decide to write about it online, they will most likely mention your company instead of putting the blame squarely on the debt collector.
Ruining relationships. The other thing to consider is the long-term health of your business. Just because a customer falls into debt and must be turned over to a debt collector does not mean that they will never be able to be a client of yours again. Chances are, you have spent time and money developing a relationship with that client already. If you turn them over to an unethical debt collector, all that investment will go out the window. If/when the customer gets over whatever issue is preventing payment, they may become a valuable customer again. Even when pursuing a debt, it is never a good idea to burn bridges in business.
Business ethics. While every business has a different tolerance for moral and ethical issues, no business wants to be seen as being completely unethical. This will not only hurt your reputation with consumers but can also affect your company in other areas. Vendors may be less likely to want to work with companies that are believed to be unethical. A company with this reputation may also have a hard time keeping or attracting new employees.
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Federal Debt Collection Regulations
All debt collectors are subject to the Consumer Credit Protection Act and the Fair Debt Collection Practices Act. The former was established by the federal government in 1968 and the latter was created in 1977 as an amendment to the Consumer Credit Protection Act and has been amended multiple times since. The Fair Debt Collection Practices Act ( or FDCPA) speaks specifically to what debt collectors must do and may not do while pursuing a debt.
The law states that the following when trying to collect a debt with a consumer:
- Identify themselves and notify the consumer
- Give the name and address of the original creditor
- Notify the consumer of their right to dispute the debt
- Provide verification of the debt
- File a lawsuit in a proper venue
In addition to having to follow these regulations, the Act also lays out multiple practices that are not acceptable or specific regulations that must be followed. These include:
- Only making contact during specified hours
- Must cease communication upon request
- Cannot engage in excessive or abusive conversations or telephone calls
- Cannot call consumers at work
- Cannot contact a consumer if you know they have retained an attorney
- Cannot communicate with the consumer after the request for validation has been made
- Cannot misrepresent yourself or deceive the consumer
- Cannot publish the consumer’s name or address
- Cannot seek unjustified amounts
- Cannot threaten arrest or legal action
- Cannot use abusive or profane language
- Cannot reveal or discuss the debt with a third party
- Cannot contact using embarrassing media
- Cannot report false information on a credit report
How to Choose an Ethical Debt Collection Agency
There are over 5,000 debt collecting companies in the United States alone. With any industry this large, there are bound to be some great companies, some very bad ones and many that are somewhere in between. So, how do you find an ethical debt collection company among the thousands available?
Read the reviews. Just like people will look online for information about your company’s reputation and service before doing business with you, you should do the same when looking for a debt collection company. Sites like Trustpilot or ConsumerAffairs compile reviews from around the internet and put them in one place to make it easy to gather information.
Look for accreditation. There are also organizations that vet companies’ ethics, standards, and practices as well. The Better Business Bureau (BBB) gives companies ratings that range from A+ to F based on things like the number of complaints filed, transparency, time in business, and more. They even give their seal of approval to the best companies in each industry.
Ask questions. Once you have a basic understanding of the federal and state requirements for debt collection in your area, it is fair to ask questions of the company you are thinking of working with. Ask about their philosophy, how they go about their business, and how they handle disputes. Remember, they will be an extension of your company so you want to vet them thoroughly.
Collecting debt from customers is never a pleasant process but it is a necessity in business. If done ethically, it does not have to be a terrible experience though for you or the customer who is in debt. When you select an ethical debt collection company, you will protect your business’ reputation, recover the debts that are owed, and maybe even be able to hold on to customers even after the process is complete.
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