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The “Ostrich Effect”: Why Your Customers Are Ghosting You (And How to Break the Silence)

If you are reading this, you are likely staring at an unpaid invoice and wondering, “Why won’t they just call me back?”

You have sent the polite reminders. You have left voicemails. You have tried to be understanding. In return, you get silence. This isn’t just bad manners; it is a psychological phenomenon known as the Ostrich Effect. When faced with financial stress, debtors bury their heads in the sand, hoping that if they ignore your emails long enough, you will simply give up.

And usually, they are right. Most internal accounting teams do give up after 90 days.

But when you partner with NexaCollect, the dynamic shifts instantly. We don’t let them hide. We turn the “silence” into a calculated escalation that forces a decision: Pay now, or face the consequences.

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3 Reasons Why They Ignore You (But Won’t Ignore Us)

Internal billing departments lack leverage. Third-party agencies command attention. Here is the psychology behind the switch.

1. The “Vendor vs. Authority” Shift

To a debtor, you are a vendor. A relationship. Someone they can negotiate with or stall. When they receive a letter from NexaCollect, the relationship ends. We are a regulated third-party entity. Our presence signals that the debt has moved from “accounting issue” to “legal liability.”

• The Stat: Industry data shows that a formal third-party demand is 3x to 5x more effective at eliciting a response than an internal invoice reminder.

2. The Threat of Credit Damage (The 100-Point Drop)

Your internal emails might be annoying, but they don’t threaten their financial future. Our demands do.

• The Reality: A collection account reporting to Equifax, Experian, or TransUnion can drop a credit score by 100+ points overnight. For a business owner trying to secure a line of credit or a consumer trying to rent an apartment, this is a non-negotiable risk. They pay us to protect their score.

3. The “Litigation Certainty”

Debtors ignore you because they think you won’t sue over $2,000. They might be right. But they don’t know our capabilities.

• The Data: In 2024, consumer debt lawsuits surged to pre-pandemic levels. More importantly, over 70% of debt lawsuits result in a Default Judgment because the debtor fails to show up.

• The Leverage: We make them understand that ignoring the debt doesn’t stop the lawsuit; it guarantees they will lose it.

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The Escalation Timeline: What Happens When They Ignore Us?

We use a tiered pressure system designed to break the silence.

• Day 1-30 (The Wake-Up Call): We deploy Step 2 (Flat-Fee Demands). These are official, Regulation F compliant notices. They strip away the “I didn’t see the invoice” excuse.

• Day 31-60 (The Pressure Cooker): If they continue to ghost, we move to Step 3 (Contingency). Our team begins skip-tracing to find new numbers and employers. We apply intensive phone pressure.

• Day 90+ (The Nuclear Option): If they still refuse to pay, we review the file for Step 4 (Legal). If the debtor has assets (wages, property, bank accounts), our attorney network files suit. A judgment leads to wage garnishment and bank levies.

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Strategic Insight: The Risk of B2B Defaults

If you are a B2B business, ignoring a slow-paying client is dangerous.

• The Stat: Research indicates that one payment default creates a 20% probability that your client will fail within 12 months. If they default on three obligations, that probability jumps to 62%.

• The Takeaway: If they are ignoring you, they are likely ignoring others. You need to be the “squeaky wheel” that gets paid before they file for bankruptcy.

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FAQ: The Mechanics of “Ignoring It”

Q: Can a debtor simply block your calls?

A: They can block a number, but they cannot block the United States Postal Service or a Process Server. Regulation F (the modern FDCPA) also allows us to use email and text messaging (with proper opt-outs) to ensure our message lands. They can hide, but they cannot claim ignorance.

Q: Does the “Statute of Limitations” mean the debt disappears?

A: No. This is a common myth. The Statute of Limitations (SOL) only limits the time we have to sue them (typically 3-6 years depending on the state). It does not erase the debt. We can still collect, call, and report the debt to credit bureaus (for up to 7 years) long after the SOL has passed.

Q: What if they ignore the court summons?

A: That is actually the best-case scenario for you. If they ignore the summons, the court issues a Default Judgment. This gives us the legal power to garnish wages or freeze bank accounts without a trial.

Break the Silence. Secure Your Revenue.

Stop letting debtors control your cash flow with their silence. Use a system designed to get a response.

Click here to Contact Us and start your recovery campaign.

Medical debt default can significantly impact an individual’s credit score. Here are some points to consider regarding the impact of medical debt default on the patient’s credit scores:

1. Reporting to Credit Bureaus: When a medical debt goes unpaid for an extended period, the healthcare provider may send the account to a collection agency. The collection agency may then report the debt to the credit bureaus. Once it is reported, it is listed on your credit report as a collection account for up to 7 years.
2. Drop in Credit Score: Having a collection account on your credit report, especially for an unpaid debt, is considered a negative mark and can cause your credit score to drop significantly. The exact impact varies depending on various factors, including the credit scoring model being used, the individual’s existing credit history, and the amount of the debt.
3. Duration of Impact: A collection account due to medical debt default can remain on your credit report for up to seven years from the date of the original delinquency. This means that even if you pay off the debt, the negative mark can still remain on your report and potentially affect your credit score for several years.
4. Newer Scoring Models: Some newer credit scoring models, like FICO Score 9 and VantageScore 4.0, treat medical collection accounts differently than non-medical ones. They often weigh medical collections less heavily than non-medical collections, acknowledging that medical debt can sometimes be incurred through no fault of the consumer.
5. Credit Utilization Not Affected: Medical debts do not affect your credit utilization ratio since they are not tied to revolving credit accounts like credit cards. Credit utilization is a significant factor in credit scores, but medical debt impacts scores through its presence as a collection account.
6. Negotiating with the Collection Agency: Sometimes, you may be able to negotiate with the collection agency to have the account removed from your credit report once it’s paid. This is known as “pay for delete”. However, not all collection agencies will agree to this.
7. 180-Day Waiting Period: As per the changes made by the three major credit bureaus (Experian, TransUnion, and Equifax) some time ago, medical debts won’t be reported until after a 180-day waiting period to give individuals enough time to resolve the debts with insurance and healthcare providers.

If you encounter medical debt issues, it’s important to communicate openly with your healthcare provider and insurance company, and if necessary, seek advice from a consumer credit counselor or attorney.

A medical collection agency will send written demands and make persistent phone calls to your patients. They will attempt to recover the maximum portion of the bill, and if required, they will report delinquent patients to credit bureaus if they refuse to settle. They use tools like skip tracing and data scrubbing for improved performance. Since debt collectors are on the phone all day long, they know every tactic to get paid. The cost of collection agencies depends on whether you select their Fixed-fee or Contingency-fee service.

Need a Medical Collection Agency? Contact Us

Detailed explanation

A medical collection agency is a business or organization that specializes in collecting debts related to medical services. These debts can be unpaid hospital bills, doctor’s office fees, or any other expenses related to healthcare that a patient has not paid.

Here is a more detailed explanation of the steps and functions involved:

1. Assignment of Debt: When a healthcare provider such as a hospital or a doctor’s office is unable to collect payment from a patient after several attempts, the account may be assigned to a medical collection agency.
2. Attempt to Collect Payment: The medical collection agency will then try to collect the debt from the patient. This usually involves contacting the patient through letters, phone calls, and other means to request payment.
3. Reporting to Credit Bureaus: If the patient does not respond or cannot pay the debt, the collection agency may report the unpaid debt to credit reporting agencies. This can have a negative impact on the patient’s credit score.
4. Legal Action: In some cases, if the debt remains unpaid for a long period, the collection agency may decide to take legal action against the patient. This could involve filing a lawsuit to seek a judgment for the amount owed.
5. Payment Plans and Negotiations: Sometimes, the collection agency might be willing to negotiate the debt. This could include accepting a lesser amount than what is owed or setting up a payment plan that the debtor can afford.
6. Compliance with Laws and Regulations: Medical collection agencies must comply with various laws and regulations such as the Fair Debt Collection Practices Act (FDCPA) which sets standards for how debt collectors must conduct themselves. There are also state laws that can affect the process of medical debt collection.
7. Debt Buying: In some cases, medical collection agencies or other types of collection agencies might purchase medical debts from healthcare providers at a fraction of the face value and then attempt to collect the full amount from the debtor.
8. HIPAA Compliance: Since medical collection agencies deal with sensitive health information, they are also subject to Health Insurance Portability and Accountability Act (HIPAA) regulations, which require them to handle this information with care and protect patient privacy.

It is important to maintain good credit rating. Medical debt can have a negative impact on credit scores. You must understand that there are long-term consequences of not paying medical bills. You should prioritize paying off your medical debts to avoid credit damage. 

Patients can avoid having their medical debts sent to collection agencies, such as setting up payment plans with healthcare providers or applying for financial assistance programs. These proactive steps will help them avoid being contacted by collection agencies.

Consumers need to know their rights when dealing with medical collection agencies. If you believe a medical collection agency is violating the law or engaging in unethical behavior, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or consult an attorney for legal advice.

The US government has thrown several laws on collection agencies, making bad-debt recovery harder and costlier. Lower recoveries mean, low recoveries and extensive loss for businesses and doctors. Our government’s intention behind these laws is not wrong, but the ground reality is different. 

Extra costs to comply with these laws would be passed on to businesses /creditors unwilling to pay the current expenses of hiring a professional debt collector.

There are thousands of collection agencies in the USA, but most are small. They have less than ten people and work from small offices. The following changes can result in many collection agencies shutting their businesses. 

New Regulations

1. As per FTC, starting June 9, 2023, all collection agencies will be treated as financial institutions. This means all collection agencies must secure consumer data nearly the same way as banks.
   Read: Impact of the GLBA on Collection Agencies
   
   
2. As of Nov 2021, The new debt validation notice format recommended by CFPB makes it easier for debtors to dispute the authenticity of debt. Debtors who would have usually paid quickly are now disputing the collection notices more than ever. All these delays and extra paperwork means higher cost, lower recovery, and more time to recover debts.
   Read this: https://nexacollect.com/debt-recovery/validation-letter/
   
   
3. In another CFPB order, all collection agencies must provide the balance as of a specific date and itemize all interest, fees, payments and adjustments from that date. Not all clients have this information handy. Many clients would take the loss upfront rather than wasting time digging into all the detailed documentation required to submit an account for collections. 
4. The government and even credit bureaus are creating roadblocks for hospitals, doctors and dentists, who rely on collection agencies and credit bureau reporting for medical debt recovery. 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 one year before medical debts can be reported. Suppressing how 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.
   Read: Making Medical Credit Reporting Harder is a Disaster in the Making

These laws are on top of all the existing Federal and State laws. These include FDCPA, TCPA, HIPAA, FCRA, and many more.

These laws can have a positive perception of people on lawmakers, but as usual, it is making doing business harder than ever.

You had submitted accounts to a collection agency, but they have ceased their operations now.

This is a fairly serious situation. 

What happens to the accounts they were working on, and what about those debtors in the middle of a payment plan?

Are there any legal aspects involved?

What about the charges that were credit reported? If there is a need to undo the credit reporting for a debtor (say due to some error), how will that be handled? 

• Try to retrieve any files, account data, or documentation they have regarding your accounts. Keep records of all communications with the collection agency. If your debtors have made payments to the agency or have arranged a payment plan.
• Explore any potential claims you may have against the agency.
• Are they notifying your debtors about the shutdown and any instructions on how their debt will be handled in the future?
• If the agency was responsible for reporting to credit bureaus, ensure this information is accurately reflected or transferred as needed. Make sure that any payments your debtors have made are reported.
• Double-check that the agency has shut down and that this isn’t a mistake or a scam.

There is a possibility that your old collection agency is not cooperating or is simply unreachable. Their phones don’t work and they have abandoned the office.

Next, Hire a new Collection Agency. Your priority this time is to look out for a mid-to-large-sized collection agency, regardless of their location. Smaller agencies always carry the risk of shutting down.

Your new collection agency should be able to guide you through the transition process. Share all updates that have been received from your old collection agency.

There is a systematic procedure to hand over accounts from one collection agency to another that is legally compliant and convenient. Not all collection agencies are experts in handling this transition.

Need a new collection agency: Contact us today Please mention that your existing agency has closed, and we’ll make the transition easy.

Many collection agencies have shut down recently due to the following reasons.

• Covid-19 Pandemic: Collection agencies were barred from collecting money in many states during the pandemic, impacting revenue from existing accounts. Moreover, the new business had stopped coming since people were not going to their offices and debt recovery was the last thought in their minds.
• CFPB rules: On November 30, 2021, the CFPB’s new Debt Collection Rules became effective, becoming a major roadblock for the entire Collections industry. Many collection agencies found it better to wind up the business than become compliant with these new CFPB rules.
• Credit Bureau Reporting changes: Starting July 2022, the top 3 credit bureau agencies made it harder to report medical debts for credit reporting. Medical debts form nearly 50% of consumer debt collections.
  
• Gramm-Leach-Bliley Act: As per FTC, starting June 9, 2023 all collection agencies will be treated as financial institutions. This means all collection agencies must secure consumer data nearly the same way as banks. It’s a huge yearly cost for collection agencies, especially the small ones.

What to Look in your new collection agency

• Most collection agencies that shut down were small collection agencies. Hiring medium-sized collection agencies with the license to collect consumer and commercial debt across the USA is always advisable.  
• They should have a staff of more than 25 people and in business for more than 10 years.
• Immediately hire a collection agency (without delay) because there may have been quite a few of your debtors who were about to pay or were paying their debt in installments.
• Hire a collection agency that offers both fixed fee and contingency fee collections. Accounts less than 90 days past due should ideally be submitted for fixed fee collections.
• You should also be able to download a collection performance report for all your accounts online. 
• They should have the license to collect money in all 50 states, which takes care of issues in case your debtor crosses state lines.

 

 

We all agree that healthcare costs in the USA are incredibly 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.

Back to our core topic of medical debts and credit reporting of medical bills, here are our thoughts on this matter.

Regardless of the balance, reporting all unpaid bills to credit bureaus as the final step does two main things.

1. Inform future creditors about bills on which a person has defaulted so they can assess their own risk to lend money to that person.
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 scores instead of leaving them unpaid.

But all this is changing, “only” for medical debts.

Credit bureaus have implemented these new rules:

a) Stop reporting medical debts lower than $500
b) Remove medical line items that have been fully paid
c) Collection agencies must wait one 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 have made their own rules.

All these create roadblocks for medical credit reporting, encouraging patients to avoid paying their bills.

Debt is a debt … Shouldn’t all unpaid defaults ( 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 undoubtedly result in many unintended consequences.

•  Fewer patients would be willing to pay their medical bills. 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.
• Won’t hospitals be encouraged to push patients for procedures with a higher chance of getting paid?
•  This also means that the cost of medical treatments will increase gradually.
•  Some medical practices may try to intentionally inflate the cost of specific 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 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 does defaulting on one type of bill differ less from other kinds of bills? Isn’t this increasing the risk for future creditors who will lend money to the patient without knowing that the patient had past unpaid (medical) bills?

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

Suppressing how 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.