Training Manual Jrb

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Training Manual Jrb

  1. 1. Welcome to the RMS 3rd Party/Financial Services Team The Management Team’s Commitment: Throughout your training and your tenure with the RMS 3rd Party/Financial Services team, we are committed to your success and development. The method that we use to ensure this is the FourStep Training Process: The Four-Step Training Process (Tell, Show, Do, Review): Tell We will tell you how to do a job or task by explaining the processes, techniques, systems, tools and skills you will need to be successful in performing a job or task. Show We will show you how to do a task or job by demonstrating the things we expect you to do and know, or how to do a specific job or task. Do We will allow you to do a job or task while we watch and coach you through it. Review We will review your performance of the job or task, ensuring you understand each concept, skill, and process. Further, we expect that you will hold us accountable to this Four-Step Training Process throughout your training and beyond. Our Expectation of You: Always put in your best effort. Ask questions. Hold us accountable to the 4 steps. Be engaged in your work. And, always act “LME” Legally – Follow the letter and the spirit of any laws that apply specifically to your job as a collector for RMS, or generally to your conduct on the job. Morally – Always try to do what is right, for the team, the company, our clients and yourself. Ethically – Be an example of best practices in the way you conduct yourself as a collector. 1
  2. 2. Receivable Management Services & The Collection Industry The role of the Receivable Management Services Financial Services/Third Party team is to work with people or businesses that owe debts to our clients. As a debt collector, you will be responsible for contacting, negotiating payment, and holding debtors accountable for their legal obligation to our clients. Debt collection is a vital part of our economy. Efforts of debt collection professionals contribute to keeping interest rates lower for everyone and support small and large businesses by keeping their revenue flowing. As a debt collection professional on the Financial Services team, you will be part of a vital and growing industry. Credit Card Collections: The Receivable Management Services – Financial Services Unit specializes in collection of credit card accounts. Other lines of business include credit union loans, auto loans, over-drafts, and insufficient check deficiencies. There are two types of credit card accounts that we may handle on behalf of our clients: Personal credit cards and business credit cards. Personal Credit Cards A personal credit card is a card opened by a consumer for personal, family, or household use. Credit has been extended by the credit card company based on the personal credit-worthiness of the applicant. Usually, there is one borrower, and one point of contact that may be made on the account. In some cases, either at the request of the consumer, or at the request of the lender, the account may be in more than one person’s name. Situations that may result in multiple parties to the same debt are: if there are multiple applicants, the credit card company requires co-maker, or if the borrower stipulates an authorized user. At the request of the applicants, two parties may apply for a joint credit card account. For example, a husband and wife may jointly decide to apply for a credit card. Both spouses are listed as borrowers and can and should be contacted. Each is equally responsible for payment of the account. Some applicants may not be credit-worthy to open an account on their own. In those cases, the lender may require a co-borrower (also called a co-maker) on the file. The co-maker agrees to take responsibility for payment of the credit card account if the primary borrower fails to fulfill the terms of the credit card contract. In this situation, both the borrower and co-maker are responsible for the debt to the credit card company and should be contacted. Neither of these situations should be confused with an “authorized user,” who is a person designated by the borrower as having the right to make charges to the account, but is not responsible for payment of the debt. An example of an authorized user is when a parent requests a card in their child’s name on their account to be used in emergencies. The minor child would not be legally responsible for payment of charges (to the credit card company – to their parents is a different story). In this case, only the borrower may be contacted. When collecting on personal credit card accounts, the FDCPA must be followed in all communications with the debtor or with third parties. 2
  3. 3. Business Credit Cards A business credit card is a card opened up for the benefit of a business. The contract that creates the credit card account usually stipulates the purchases made on the card must be for the business. Under most circumstances, business credit cards require the cardholder to provide a “personal guarantee” that if the company fails to pay for the charges made to the card, the card holder will take responsibility for paying the account personally. This person is called the “Personal Guarantor” or “PG.” The PG must also be found to be credit-worthy by the credit card company. Requiring a personal guarantee protects the credit card company from loss if the business does not pay or closes. It also can be a deterrent from misuse, because the PG bears personal responsibility for the card, equal to the company, or in some instances greater than the company. When collecting on business credit card accounts, the FDCPA does not strictly apply. The FDCPA does not apply at all when contacting the business. There is no confidentiality and you can speak to anyone. When contacting the PG at home, while the PG is not protected by the FDCPA, third parties have some rights, and you should therefore stick to the legal hours of contact. Who are our clients? RMS has partnered with some of the premier credit card issuers in the world. Among our past and present relationships are: Citibank JP Morgan Chase Card Services MBNA/Bank of America Banker’s Bank First Equity Credit Card Various Credit Unions Who are our competitors? The credit card collections industry is a competitive marketplace. While there are any number of collection agencies and law firms specializing in credit card collections, some of our major competitors include NCO Group, MRS, Associates, and First Credit Services. What does competition mean? Competition means we always need to be on top of our game. We need to provide the best results coupled with the best service to retain and grow our relationships. Each collector is charged with doing their best to collect as much money as possible and to meet the customers’ requirements, outlined in each client’s “Service Level Agreement.” Another facet of debt collection is the debt-buyer industry. Companies exist that buy debt for pennies on the dollar, and then collect on the debt themselves. It is RMS’s policy that we do not purchase debt. We collect only on behalf of our clients. On the next page, you will see a flow chart example of how credit card accounts may end up in third party collections. General Note The first number of a credit card number tells you what kind of card it is: • 3 – American Express • 4 – Visa • 5 – Mastercard • 6 – Discover • 8 – Often denotes a “private label" 3
  4. 4. 4
  5. 5. Unit 1 Collection Law To collect the debts placed with us by our clients, we use two main types of communication. Mail and phone calls. The Fair Debt Collection Practices Act or FDCPA is a law that was drafted by the U. S. Congress in 1977 and enacted in 1978 that governs consumer debt collection. In particular, the FDCPA documents guidelines for your phone and mail contact with consumer debtors. All of the letters we use have been drafted by management and approved by our compliance officer. The letters are drafted to be effective and to be compliant with the FDCPA and state laws regulating contact by collection agencies with debtors. You will not draft letters, but you will have the opportunity to use the letters we have programmed in our system. Copies of all of the letters are located at the end of the manual. You will be provided with scripting for messages and initial debtor communications. The FDCPA will outline for you how to legally communicate verbally with a debtor. • You will read and learn to apply the FDCPA. • You will learn about court decisions that have clarified aspects of the FDCPA and how they relate to you. • You will learn about relevant state laws. • You will learn the Mini-Miranda and its significance. • You will learn how to be compliant with the letter and spirit of the law. To begin, we will review the FDCPA in its entirety. 5
  6. 6. Unit 1 SECTION 1 - Collection Law - FDCPA THE FAIR DEBT COLLECTION PRACTICES ACT As Amended by Public Law 104-208, 110 Stat. 3009 (Sept. 30, 1996) An Act Sept. 20, 1977 [H.R. 5294] To amend the Consumer Credit Protection Act to prohibit abusive practices by debt collectors. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end thereof the following new title: Consumer Credit Protection Act, amendments TITLE VIII - DEBT COLLECTION PRACTICES Sec. 801. Short title 802. Congressional findings and declaration of purpose 803. Definitions 804. Acquisition of location information 805. Communication in connection with debt collection 806. Harassment or abuse 807. False or misleading representations 808. Unfair practices 809. Validation of debts 810. Multiple debts 811. Legal actions by debt collectors 812. Furnishing certain deceptive forms 813. Civil liability 814. Administrative enforcement 815. Reports to Congress by the Commission 816. Relation to State laws 817. Exemption for State regulation 818. Effective date 6
  7. 7. FDCPA TEXT COMMENTS ß 801. Short Title This title may be cited as the “Fair Debt Collection Practices Act.” ß 802. Congressional findings and declaration of purpose (a) There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy. (b) Existing laws and procedures for redressing these injuries are inadequate to protect consumers. (c) Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts. (d) Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce. (e) It is the purpose of this title to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses. PRACTICAL APPLICATION While the FDCPA is a consumer protection law, a side effect of the law is to level the playing field for all collection agencies 7
  8. 8. ß 803. Definitions As used in this title-(1) The term “Commission” means the Federal Trade Commission. (2) The term “communication” means the conveying of information regarding a debt directly or indirectly to any person through any medium. (3) The term “consumer” means any natural person obligated or allegedly obligated to pay any debt. (4) The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another. (5) The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. (6) The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6), such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include: (A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor; (B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate COMPLIANCE POINT Types of Communication: • Phone contact • Letters • Left messages • Faxes COMPLIANCE POINT Term # 5 is the part that tells us that businesses are not protected by the FDCPA. In order for a debt to be considered a consumer debt, it must be incurred for personal, family, or household purposes. 8
  9. 9. control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts; (C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties; (D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt; (E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and (F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor. (7) The term “location information” means a consumer’s place of abode and his telephone number at such place, or his place of employment. (8) The term “State” means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing. PRACTICAL APPLICATION Creditors that collect using a different name than their regular DBA name known to consumers are bound by the FDCPA. The Original Creditor is not bound by the FDCPA if they are collecting debt on their own behalf. Example: Dell Computer vs. Dell Financial Services. Dell Computer is the entity that builds and sells computers. DFS is the entity that maintains the lease contract payments and financing agreements. DFS is bound by the FDCPA when collecting debts on behalf of computers purchased from Dell Computer. 9
  10. 10. ß 804. Acquisition of location information Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall: (1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer; (2) not state that such consumer owes any debt; (3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information; (4) not communicate by post card; (5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and (6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector. COMPLIANCE POINT “Location Information” is defined by the FDCPA as: • Place of Abode • Telephone number • Place of Employment You may not request any other information from a third party. DEFINITION In debt collection, a third party is any person or entity that is not a party to the debt. Just like we are a third party collection agency to our client, a neighbor, child, employer or other person is a third party to a consumer’s debt. You cannot disclose any information about a debt to a third party without the express permission of the debtor. PRACTICAL APPLICATION If a debtor has attorney representation, you must update their records so that the address and phone number are directed to the attorney. YOU MUST DOCUMENT THE DEBTOR’S CONTACT INFO IN THE NOTES. 10
  11. 11. ß 805. Communication in connection with debt collection (a) COMMUNICATION WITH THE CONSUMER GENERALLY. Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt: (1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o’clock antimeridian and before 9 o’clock postmeridian, local time at the consumer’s location; (2) if the debt collector knows the consumer is Represented by an attorney with respect to such debt And has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or (3) at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication. (b) COMMUNICATION WITH THIRD PARTIES. Except as provided in section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than a consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector. (c) CEASING COMMUNICATION. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except: PRACTICAL APPLICATION The legal hours that you may contact a debtor are from 8am to 9pm in the debtor’s local time. YOU ARE RESPONSIBLE TO KNOW WHAT TIME IT IS WHERE THE DEBTOR LIVES. DISCUSSION POINT What does “Inconvenient” mean? PRACTICAL APPLICATION A “reasonable” period of time for an attorney to respond to you is usually 30 days, unless there is a time sensitive issue that requires immediate attention. OUR POLICY IS THAT YOU MUST PROVIDE THE ATTORNEY WITH A DEADLINE TO RETURN YOUR CALL BEFORE CONTACTING THE DEBTOR DIRECTLY. 11
  12. 12. (1) to advise the consumer that the debt collector’s further efforts are being terminated; (2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or (3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy. If such notice from the consumer is made by mail, notification shall be complete upon receipt. (d) For the purpose of this section, the term “consumer” includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator. PRACTICAL APPLICATION While the FDCPA legally allows you to contact the debtor one additional time after receiving a “Cease & Desist” letter, our policy is that once a letter is received, YOU MAY NOT CONTACT THEM AGAIN. If additional contact is necessary, it will be handled by management. If a debtor uses the words “Cease & Desist” verbally over the phone, discuss the situation with your manager before proceeding. 12
  13. 13. ß 806. Harassment or abuse A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person. (2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader. (3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 603(f) or 604(3)1 of this Act. (4) The advertisement for sale of any debt to coerce payment of the debt. (5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number. (6) Except as provided in section 804, the placement of telephone calls without meaningful disclosure of the caller’s identity. COMPLIANCE POINT Harassment is not defined by the FDCPA. HARASSMENT IS DEFINED BY THE CONSUMER. ANYTHING THAT MAKES A PERSON FEEL HARASSED COULD BE CONSIDERED HARASSMENT. The list of harassing behaviors listed here in the FDCPA is not exhaustive and is intended only to exemplify the types of behavior that could be considered harassing. 13
  14. 14. ß 807. False or misleading representations A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof. (2) The false representation of: (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt. (3) The false representation or implication that any individual is an attorney or that any communication is from an attorney. (4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action. (5) The threat to take any action that cannot legally be taken or that is not intended to be taken. (6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to: (A) lose any claim or defense to payment of the debt; or (B) become subject to any practice prohibited by this title. (7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer. (8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed. (9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any PRACTICAL APPLICATION Refusing to identify yourself and/or the company you work for is a violation of the FDCPA unless you are dealing with a third party as defined in section 804. Remember, if you are talking to someone who is not the debtor or the debtor’s spouse, you need only identify yourself by name unless you are expressly asked the name of your employer. COMPLIANCE POINT Follow this simple rule: ONLY STATE WHAT YOU KNOW IS TRUE. EXAMPLE: Inflating the balance of a debt to settle for the actual balance. PRACTICAL APPLICATION While you can’t threaten any action that can’t legally be taken, you can be honest about possible actions our client might take. - My client could be protected via the equity in your house. - You are employed in a wage garnishment state. PRACTICAL APPLICATION Putting the Scales of Justice on envelopes or letterhead would be considered misrepresentation to imply government association. 14
  15. 15. State, or which creates a false impression as to its source, authorization, or approval. (10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. (11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication s from a debt collector, except that this paragraphshall not apply to a formal pleading made in connection with a legal action. (12) The false representation or implication that accounts have been turned over to innocent purchasers for value. (13) The false representation or implication that documents are legal process. (14) The use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization. (15) The false representation or implication that documents are not legal process forms or do not require action by the consumer. (16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 603(f) of this Act. COMPLIANCE POINT MAKE SURE TO GIVE THE MINIMIRANDA!!!! EXAMPLES (of misleading communications) • • • Use of “Docket #” or year before claim # such as 05255123456-US Use of “…and Associates” in name. Advising the debtor to disregard the letter they received that advises them of the legal right to dispute a debt. 15
  16. 16. ß 808. Unfair practices A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law. (2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit. (3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution. (4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument. (5) Causing charges to be made to any person for communications by concealment of the true propose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees. (6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if: (A) there is no present right to possession of the property claimed as collateral through an enforceable security interest; (B) there is no present intention to take possession of the property; or (C) the property is exempt by law from such Dispossession or disablement. (7) Communicating with a consumer regarding a debt by post card. (8) Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business. EXAMPLE (of unfair practices) A woman tells a collector not to discuss the debt with her husband because he will hurt her. The collector threatens to tell the husband to get her to pay. EXAMPLE (of unfair practices) A collector changes the date on a post-dated check to meet a budget deadline. DISCUSSION POINT What about cell phones? They weren’t in use when the FDCPA was written. EXAMPLE (of unfair practices) A threat to lien or remove property such as a home or car when they aren’t related to the debt is not allowed. PRACTICAL APPLICATION We can identify ourselves as RMS but we cannot use Receivable Management Services. The initials could stand for anything. 16
  17. 17. ß 809. Validation of debts (a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing: (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. (c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer. ß 810. Multiple debts If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer’s directions. COMPLIANCE POINT A debt validation letter is sent to each debtor upon receipt of the file from the client and before it is forwarded to you to work. PRACTICAL APPLICATION Debtors will often try to tell you that you are required to provide them with copies of bills, statements, or contracts. Legally, we are not required to provide that documentation. Clues that a debtor is using this as a stall tactic are requests for multiple statements, copies of other correspondence, or copies of documents that do not relate to the debt. COMPLIANCE POINT Debtor payments must be applied as specified. EXAMPLE: Collector is working a credit card with 30% fee and an auto loan with 50% fee for the same debtor. The auto loan is disputed. Payments for the CC can’t be applied to the auto loan to get a higher fee. 17
  18. 18. ß 811. Legal actions by debt collectors (a) Any debt collector who brings any legal action on a debt against any consumer shall: (1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or (2) in the case of an action not described in paragraph one, bring such action only in the judicial district or similar legal entity: (A) in which such consumer signed the contract sued upon; or (B) in which such consumer resides at the Commencement of the action. (b) Nothing in this title shall be construed to authorize the bringing of legal actions by debt collectors. ß 812. Furnishing certain deceptive forms (a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating. (b) Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 813 for failure to comply with a provision of this title. 18
  19. 19. ß 813. Civil liability (a) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title with respect to any person is liable to such person in an amount equal to the sum of: (1) any actual damage sustained by such person as a result of such failure; (2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or (B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and (3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs. (b) In determining the amount of liability in any action under subsection (a), the court shall consider, among other relevant factors: (1) in any individual action under subsection (a)(2)(A), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or (2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional. (c) A debt collector may not be held liable in any action brought under this title if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. (d) An action to enforce any liability created by this title COMPLIANCE POINT Damage awards are determined by: 1. Actual Damages 2. Maximum $1000 for an individual OR 3. Maximum $500,000 for a class action suit. 4. Attorney Fees COMPLIANCE POINT Factors considered in determining the amount of liability in an FDCPA civil lawsuit are: 1. Frequency & Persistence 2. Nature of offense 3. The extent to which the offense was intentional COMPLIANCE POINT An individual can be held personally liable unless a “preponderance of the evidence” proves the violation was not intended and was not the result of carelessness. FOR EXAMPLE: A debt collector contacts a bankrupt debtor. Appropriate steps had been taken (Banko/Lexis Nexis) to identify bankruptcies. (AKA – BONA FIDE ERROR DEFENSE) 19
  20. 20. may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs. (e) No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason. DISCUSSION POINT An error with the automatic dialer system causes 1000 California accounts to be called at 5am. Is this a violation and if so, to what extent? If not, why not? 20
  21. 21. ß 814. Administrative enforcement (a) Compliance with this title shall be enforced by the Commission, except to the extend that enforcement of the requirements imposed under this title is specifically committed to another agency under subsection (b). For purpose of the exercise by the Commission of its functions and powers under the Federal Trade Commission Act, a violation of this title shall be deemed an unfair or deceptive act or practice in violation of that Act. All of the functions and powers of the Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with this title, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act, including the power to enforce the provisions of this title in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule. (b) Compliance with any requirements imposed under this title shall be enforced under(1) section 8 of the Federal Deposit Insurance Act, in the case of: (A) national banks, by the Comptroller of the Currency; (B) member banks of the Federal Reserve System (other than national banks), by the Federal Reserve Board; and (C) banks the deposits or accounts of which are insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), by the Board of Directors of the Federal Deposit Insurance Corporation; (2) section 5(d) of the Home Owners Loan Act of 1933, section 407 of the National Housing Act, and sections 6(i) and 17 of the Federal Home Loan Bank Act, by the Federal Home Loan Bank Board (acting directing or through the Federal Savings and Loan Insurance Corporation), in the case of any institution subject to any of those provisions; (3) the Federal Credit Union Act, by the Administrator of the National Credit Union Administration with respect to any Federal credit union; (4) subtitle IV of Title 49, by the Interstate Commerce Commission with respect to any common carrier subject to such subtitle; (5) the Federal Aviation Act of 1958, by the Secretary of Transportation with respect to any air carrier or any 21
  22. 22. foreign air carrier subject to that Act; and (6) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture with respect to any activities subject to that Act. (c) For the purpose of the exercise by any agency referred to in subsection (b) of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this title shall be deemed to be a violation of a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this title any other authority conferred on it by law, except as provided in subsection (d). (d) Neither the Commission nor any other agency referred to in subsection (b) may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this title. 22
  23. 23. ß 815. Reports to Congress by the Commission (a) Not later than one year after the effective date of this title and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this title, including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this title is being achieved and a summary of the enforcement actions taken by the Commission under section 814 of this title. (b) In the exercise of its functions under this title, the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 814 of this title. ß 816. Relation to State laws This title does not annul, alter, or affect, or exempt any person subject to the provisions of this title from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this title, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this title if the protection such law affords any consumer is greater than the protection provided by this title. COMPLIANCE POINT Where a conflict exists between the FDCPA and a state law, the one that gives the most protection to the consumer prevails. ß 817. Exemption for State regulation The Commission shall by regulation exempt from the requirements of this title any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this title, and that there is adequate provision for enforcement. ß 818. Effective date This title takes effect upon the expiration of six months after the date of its enactment, but section 809 shall apply only with respect to debts for which the initial attempt to collect occurs after such effective date. Approved September 20, 1977 23
  24. 24. LEGISLATIVE HISTORY: Public Law 95-109 [H.R. 5294] HOUSE REPORT No. 95-131 (Comm. on Banking, Finance, and Urban Affairs). SENATE REPORT No. 95-382 (Comm. on Banking, Housing, and Urban Affairs). CONGRESSIONAL RECORD, Vol. 123 (1977): Apr. 4, considered and passed House. Aug. 5, considered and passed Senate, amended. Sept. 8, House agreed to Senate amendment. WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 13, No. 39: Sept. 20, Presidential statement. AMENDMENTS: SECTION 621, SUBSECTIONS (b)(3), (b)(4) and (b)(5) were amended to transfer certain administrative enforcement responsibilities, pursuant to Pub. L. 95-473, ß 3(b), Oct. 17, 1978. 92 Stat. 166; Pub. L. 95-630, Title V. ß 501, November 10, 1978, 92 Stat. 3680; Pub. L. 98-443, ß 9(h), Oct. 4, 1984, 98 Stat. 708. SECTION 803, SUBSECTION (6), defining “debt collector,” was amended to repeal the attorney at law exemption at former Section (6)(F) and to redesignate Section 803(6)(G) pursuant to Pub. L. 99-361, July 9, 1986, 100 Stat. 768. For legislative history, see H.R. 237, HOUSE REPORT No. 99-405 (Comm. on Banking, Finance and Urban Affairs). CONGRESSIONAL RECORD: Vol. 131 (1985): Dec. 2, considered and passed House. Vol. 132 (1986): June 26, considered and passed Senate. SECTION 807, SUBSECTION (11), was amended to affect when debt collectors must state (a) that they are attempting to collect a debt and (b) that information obtained will be used for that purpose, pursuant to Pub. L. 104-208 ߆2305, 110 Stat. 3009 (Sept. 30, 1996). 20 24
  25. 25. SECTION 2 - Collection Law – COURT RULINGS The following are court rulings that have clarified the FDCPA. You should be aware of these, as you will most likely encounter a situation to which one or more apply. Brady v. Credit Recovery Company - The Brady Decision states that a debtor does not have to dispute a debt in writing as the original language of the FDCPA states. If you have any reason to know or suspect that it is disputed, you must communicate the dispute to the creditor. How does this apply to you? The FDCPA states that a debtor must dispute a debt in writing. This ruling lessens the requirement so that you must document an account as disputed regardless of how you are notified. A debtor only need tell you they dispute the debt. That said, the dispute must be meaningful. In other words, if a debtor disputes a debt, they must also tell you why the debt is disputed. If no reason is given, the creditor cannot remedy the situation. Chaudhry v. Gallerizo - States that “consistent with legislative history, verification [debt validation] is only intended to eliminate the…problem of debt collectors dunning the wrong person or attempting to collect debt which the consumer has already paid. There is no concomitant obligation to forward copies of bills or other detailed evidence of the debt.” How does this apply to you? You will probably run into debtors that will tell you that they will not pay or consider payment of their debt without stacks of papers proving the debt. This is why we say in the talk-off “Are you familiar with this?” Should you encounter a debtor that claims knowledge of the FDCPA and a right to require you to provide an unreasonable amount of documents to them, I would invite you to read the above text verbatim to them. Furthermore, a consumer is obligated to maintain their own financial records. 25
  26. 26. SECTION 3 - Collection Law – TIME ZONES & COMPLIANCE The FDCPA defines appropriate times to call a consumer debtor as 8:00 am to 9:00 pm in the debtor’s time zone. Below is a map of the US showing the time zones. For your purposes this applies as follows: • At 8am you can begin calling Eastern time zone accounts. You must stop by 9pm. • At 9am you can begin calling Central time zone accounts. You must stop by 10pm. • At 10am you can begin calling Mountain time zone accounts. You must stop by 11pm. • At 11am you can begin calling Pacific time zone accounts. You must stop by 12 midnight. • At 12 noon you can begin calling Alaska accounts. You must stop by 1am. The two most common time zone errors are the Florida Panhandle (area code 850) and El Paso, TX (area code 915). These two small areas are in a different time zone from the rest of their states. Look for other states that may be split between two time zones. Some states do not observe daylight savings time in the typical “Spring Forward/Fall Back” fashion. The following are the states and how their time works: • Indiana - During the winter, the time is the same as Eastern. During the summer, the time is the same as Central. (The extreme west of Indiana is Central time zone and does observe daylight savings time). • Arizona - During the winter, the time is the same as Mountain. During the summer, the time is the same as Pacific. • Hawaii - During the winter, Hawaii is 5 hours behind us. During the summer, Hawaii is 6 hours behind us. 26
  27. 27. SECTION 4 - Collection Law – COMPLIANT ACTIVITY Review the following actions or behaviors and identify if they are compliant with the FDCPA or not. Cite the page and article of the FDCPA that supports your answer. 1. Collector tells a debtor their car can be re-possessed to pay off a credit card debt. 2. Collector tells a debtor their car can be re-possessed to pay off their secured auto-loan. 3. Collector calls a debtor’s neighbor to ask for location information. 4. Collector calls a debtor’s neighbor and asks them to leave a note for the debtor on their door. 5. Collector calls the debtor at work and leaves a detailed message regarding the debt with the receptionist. 6. Collector tells a debtor that if they do not pay voluntarily, the collector will contact their employer to have the funds taken out of their paycheck. 7. Collector calls a debtor at work and tells them that they are a debt collector, and any information obtained will be used for that purpose. 8. Collector calls a debtor and advises that the collector refuses to work with the debtor’s attorney. 9. Collector makes an initial call to a debtor at 8am in their time zone and the debtor advises them not to call that early any more. 10. Collector calls debtor named “Joe Smith.” A woman answers the phone and identifies herself as Mrs. Smith. Collector learns later it was the debtor’s girlfriend, not his wife. 11. Collector tells a debtor an attorney will review their file for possible legal remedies to be taken against them. 12. A collector calls a debtor at the number provided by the client. The debtor requests no more calls to that number because it is a pre-paid cell phone and they are charged for the minutes. The collector persists stating that unless the debtor provides an alternate number, we must call the cell phone. 13. A collector leaves a message at a debtor’s home and advises he is calling from Receivable Management Services on the voice mail. 14. A consumer disputes a debt verbally. The collector tries to work through the objection and collect the undisputed portion of the debt, and updates the file as partially disputed. 15. A debtor hangs up on a collector. The collector schedules a follow up call for 2 business days later. 27
  28. 28. SECTION 5 - Collection Law – STATE LAWS In addition to protection granted by the federal government through the FDCPA, some states have similar laws. As stated in the FDCPA, when the state law and federal law are conflicted, the one that prevails is the one that provides the most protection to the consumer. Here are some examples of state laws that you must adhere to on a case by case basis: Solicitation of Post-Dated Checks/Check by Phone • It is illegal to SOLICIT a post dated check from a consumer debtor residing in Massachusetts. However, you may ACCEPT one if offered. You may want to use language such as the following: “…for your protection, your state does not allow me to ask you to send a post-dated check. However, if you wanted to offer one, I would be able to accept it. Now, how do you plan to resolve this debt?” OR “For your convenience, we offer the following payment options: You may mail a check, submit payment via Western Union, or you may authorize a check over the phone for today or a date of your choosing.” • It is illegal to charge a fee for processing a check-by-phone for debtors residing in the state of Iowa. EVEN IF THE CLIENT ALLOWS IT, YOU MAY NOT CHARGE A FEE TO IOWA DEBTORS. Collecting Past Statute The “Statue of Limitations” on a debt is the time after which either the remedies available to recover a debt are limited, or you are barred from pursuing the debt at all. There are two types of “Statutes of Limitations.” In most states, after the statute expires you can pursue the debt, but the court either will not hear the case due to the length of time that has passed or the debtor can raise the time limit as a defense for non-payment. The second type of statute of limitations is “claim invalidating” which means that you are not only prohibited from suing the debtor, you may not contact them or attempt to collect the debt in any way. Collecting past statute is illegal in the states of: • Wisconsin • Mississippi Spousal Contact Restrictions The following states have restrictions on discussing a debt with a debtor’s spouse. • Colorado: Only with written permission from the debtor • New Hampshire: One time only & only after 30 days with debtor contact • Iowa: Requires debtor permission • Washington: Yes, but a maximum of 3 times per week. • DC, Hawaii, Illinois, Maine, Massachusetts: No spousal contact allowed Calling Restrictions The following states have special restrictions on calling. See the statute of limitations sheet (next page) for the specific details: • California • Colorado 28
  29. 29. • New York • Tennessee • Washington (state) 29
  30. 30. SECTION 5 - Collection Law – STATUTES OF LIMITATIONS & OTHER STATE GUIDELINES State Alabama Alaska Arizona Arkansas California Colorado Connecticut D.C. Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota MISSISSIPPI Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia WISCONSIN Spousal Contact? Calling restrictions? YES YES YES YES YES 1x / Day, 2x / 7 days YES, if written perm. from debtor 1 x / Day YES NO YES YES YES NO YES NO YES YES, if perm. from debtor YES YES YES NO YES NO YES YES YES YES YES YES YES YES, 1x only!! Must be after 30 days w/ no debtor contact YES YES YES 1 x / Day, 5 x / 7 Days YES YES YES YES YES YES YES YES YES YES 1 x / Day, 5 x / 7 Days YES YES YES YES HO: 3x/ 7 Days Max. 3x/week POE: 1x/ 7 Days YES YES Open-ended Contracts (Credit & Charge Cards) 3 3 3 6 4 Written Contracts (Auto Loans) 6 6 5 6 4 6 6 3 3 4 4 6 5 6 5 6 6 3 3 5 6 6 10 6 10 20 20 3 No Limit 20 7 10 20 20 20 4 3 5 3 6 3 6 6 6 5 5 15 10 6 3 6 6 6 6 5 15 10 20 12 20 10 10 Judgments 20 5 10 10 10 3 3 7 5 5 6 3 10 8 6 3 10 10 20 10 6 4 6 4 4 4 6 3 6 4 10 3 6 6 4 4 3 5 6 6 6 6 5 6 15 5 6 4 10 3 6 6 4 6 5 6 20 14 20 10 10 6 21 5 10 4 20 10 20 10 10 8 20 8 3 6 6 6 10 20 6 10 10 YES 3 10 5 Wyoming ** An expired Statute of Limitations only means that we cannot pursue legal remedies to recover the debt. The debtor still owes the debt in all states except Wisconsin & Mississippi. It is illegal to collect past statute in WI & MS. 30
  31. 31. SECTION 6 - Collection Law – COMMERCIAL ACCOUNTS The FDCPA does not apply to commercial debtors. Often commercial debtors will try to invoke rights under the FDCPA to which they are not entitled. The FDCPA is intended to protect consumers from egregious tactics by collection agencies or big businesses, assuming that the consumer does not have the business savvy that a collector or other business person would. The FDCPA defines a consumer as “any natural person that owes or allegedly owes money” and that debt is “for personal, family, or household use.” Business people are expected to have some level of competence to handle the affairs of the business, therefore, the playing field between a business and a collection agency is a level one and no special protection is given. Debt Validation - Commercial debtors may claim a right to debt validation under the FDCPA. Legally, we are not bound to provide validation for a commercial debt. Do not dismiss this request too quickly. Probe further to find out why your contact is requesting it. Is it a stall tactic, or a genuine request for information? You’ll be able to tell if it is a stall tactic if you see record in the account history that the proof has been provided previously, or if there are prior payments made to RMS or to the client. If they don’t know the debt, ask them who was making the payments. If information has been provided previously to someone within the company, refer them to that person. Repeated requests for information of this type, or an original request for mountains of documents are an obvious stall tactic and should be handled as such. If there is no history of live contact, find out more about their business process. The debtor company may not have record of having done business with the client previously. It is also possible that the personal guarantor was responsible for submitting the invoices to be paid, and neglected to do so. In this case, you may need to request invoices or a contract to prove the obligation and expedite payment. Cease & Desist - A business may send a letter or verbally request for you to “Cease & Desist” but this is a right afforded only to consumers. Advise the debtor that this right applies only to consumers, and you are within your rights to contact them in the normal course of business. Should they choose not to cooperate with you, you will be forced to recommend further action be taken against the business. Even if the debtor is a personal guarantor, because the debt is a business debt, you have a right to contact them in the normal course of business and we are not obligated to abide by a “Cease & Desist” request. 30 Days to Dispute/Overshadowing - A business debtor may tell you that they have 30 days to review their files to determine if they will file a dispute. Again, this is a right afforded to consumers only. If a commercial debtor claims the debt is disputed, advise them that the time to dispute the debt was prior to placement with our office, and further, if the dispute had merit, it would not have been sent to us. Give them a deadline to respond with a payment commitment and make clear that failure to respond will result in further action being taken against the business. If they persist that the debt is disputed, you must immediately collect the undisputed portion. Special Circumstances for Personal Guarantors – While the personal guarantor does not enjoy protection under the FDCPA, there is some indication that the courts apply FDCPA rights to third parties, such as a neighbor or spouse that is not a party to the debt. While you are not required to keep any information confidential, you must only contact the PG at home during legal hours. 31
  32. 32. SECTION 7 - Collection Law – FAIR CREDIT REPORTING ACT (FCRA) It is the policy of the RMS Financial Services Unit that we DO NOT report any of the debts we collect to any of the credit bureaus. Credit reports and scores are based entirely on how a person pays their bills and manages their credit. Often consumer debtors will inquire about the effect of the debt on their credit. Here are some responses to typical questions regarding consumer credit reporting: Will you update my credit once I have paid this? RMS does not report to any of the credit reporting agencies, so we will not update your credit. However, pursuant to the Fair Credit Reporting Act, better known as the FCRA, your creditor must update your credit to reflect the correct status of this account, which in this case would be “Settled” or “Paid.” We will notify your creditor of your payment, and if they have reported this debt, then they are legally obligated to update your credit. If I pay this, will the creditor remove this from my credit report? (Sometimes called “Pay for Delete”) A “trade line” cannot be deleted. However, once the account is paid or settled, the reported status of the account must be updated pursuant to the FCRA. Keep in mind that the credit report is a history of your credit and transactions. Thus, the trade line must remain on your credit report. The best that can happen at this point is that you change the current status by paying or settling the account. Remember that other than a bankruptcy, charge-off and judgment are the two worst statuses you can have. However, you can take action now to remedy this situation and your credit report. Can I get a letter from you/the creditor guaranteeing that my credit report will be updated? All of our payoff and settlement letters advise you that upon completion of the payment agreement, your credit will be updated to reflect a Paid or Settled status. Once we agree to the terms, I can send you a letter outlining the agreement. However, your best protection is guaranteed by federal law via the FCRA. How will my credit be affected by a settlement? Your creditor will report the account as “Settled.” Currently your credit reflects the account being a charge-off, essentially that you defaulted on a legal and binding agreement and refused to resolve it amicably with the creditor. And, the only thing that is worse than a charge off is a judgment or bankruptcy. A settlement on the other hand reflects that you worked with the creditor to come to mutually agreeable terms and followed-through with the payments as agreed! It also reflects that nothing else is owed to the creditor, which is a huge improvement over a charge off. The bottom line is that we do not report to the credit bureaus directly. We simply represent creditors and report back to them on what occurred. We report payments to the creditor, and the creditor reports to the credit bureaus. NEVER TELL A DEBTOR THAT THEIR CREDIT WILL BE IMPROVED!!! You can tell a debtor that their credit will be amended or updated, but you cannot tell them their credit or credit score will be improved. You can also tell them that potential future creditors will prefer to see that the account is resolved and nothing further is owed. The credit scoring models used by the credit reporting agencies are complex and proprietary. We cannot know how paying the debt will affect a person’s credit score, so it would be misleading to tell them that paying or settling the debt will improve their credit. It is possible that paying the debt will have no impact or a negative impact on their score depending on numerous other factors used to calculate the score. 32
  33. 33. SECTION 8 - Collection Law – BANKRUPTCY Bankruptcy is the state of being financially insolvent or unable to meet debts or discharge liabilities. Bankruptcy law applies to consumers and businesses. If you learn of an applicable bankruptcy you are not to contact the debtor any further. All contact must be restricted to the bankruptcy attorney. In order to handle a bankruptcy you will need to have a basic understanding of the types of bankruptcies and how they work. There are 4 types of Bankruptcy. Chapter 7 - This is a voluntary or involuntary court proceeding to liquidate consumer or business assets. The proceeds of the liquidation are used to pay as much of the outstanding debt as possible. Secured creditors are paid first, then if anything remains, the unsecured creditors are paid. Businesses are dissolved in a Chapter 7 bankruptcy and no longer operate. This is the most common type of consumer bankruptcy. Chapter 11 - This is a voluntary court proceeding that gives businesses an opportunity to reorganize their business to recover their ability to pay their debts over time, usually up to five years. The business does not close down, but is protected from collection proceedings prior to the bankruptcy filing date. Those debts are then re-structured and the business pays them back. Usually the business is required to remain current on post bankruptcy debts. This is the most common type of commercial bankruptcy. Think airlines!!! Chapter 13 - This is a voluntary court proceeding that gives individuals an opportunity to reorganize their debt. Assets are not necessarily liquidated, but the debtor makes a settlement with creditors that includes a payment plan lasting up to five years. Ch. 13 bankruptcy does not require that all creditors be included. Chapter 12 - Very Rare. This is for people in the farming industry. Assets are protected while a trustee determines the ability to recover financially. Bankruptcy Outcomes: A bankruptcy can be either Discharged or Dismissed. A “Discharged” bankruptcy is one that is resolved in the debtor’s favor. The court has granted the debtor’s petition and dealt with the creditors accordingly. Bankruptcy protection survives for the debts included. A “Dismissed” bankruptcy is one that has been rejected by the court. Creditors are permitted to pursue these debtors directly. Bankruptcy protection does not survive Dismissal. A bankruptcy may be dismissed if a debtor has sufficient assets that the court finds the debtor does not need bankruptcy protection. Another reason a bankruptcy may be dismissed is that the debtor did not comply with directives of the court, missed deadlines, or did not submit appropriate documentation. 33
  34. 34. SECTION 8 - Collection Law – BANKRUPTCY (continued) If a debtor has filed bankruptcy the courts impose an “Automatic Stay” against collection activity and all legal actions. During that time all creditors must cease contact with the debtor and deal with their bankruptcy attorney. If a debtor has filed bankruptcy, ask the debtor or the debtor’s attorney to provide the following information: Chapter: Date Filed: Court Filed: Attorney information: Was this debt included? What was the court’s ruling (discharged or dismissed)? The creditor will need this information should they choose to participate in the bankruptcy proceedings. Depending on the debtor responses, you may or may not need to cease all communication with them. Immediately cease communication if: • The type of bankruptcy filed is appropriate to the debt (consumer or commercial) • The debtor has retained an attorney, and the attorney confirms the bankruptcy is pending. • The debt in question is included in the bankruptcy. • The debtor filed a Ch 7 bankruptcy and there were no assets The debtor may not be entitled to protection from the bankruptcy court if: • A debtor business claims that a debt is covered under a personal bankruptcy. For example, Mr. Smith owns a printing business in a partnership with Mr. Jones. Mr. Smith is filing a Ch. 13 bankruptcy due to $50K in unsecured credit card debt. Mr. Smith is not entitled to include the debt to the business’s paper supplier in his personal bankruptcy. • A consumer may not be covered if their business is filing bankruptcy. For example, if a consumer owes for a personal cell phone bill, it cannot be included in a business bankruptcy unless it was used for the business. • A debtor does not enjoy bankruptcy protection for any debt they failed to include in the bankruptcy. For example, if a debtor files Chapter 13 bankruptcy to restructure their credit card debt, they can still be contacted by creditors and collectors on behalf of their utility bills. • A debtor does not enjoy bankruptcy protection for any debt incurred after the bankruptcy has been discharged. If a debtor claims bankruptcy protection for a debt from January of this year, but the bankruptcy was discharged 2 years ago, this debt could not possibly be covered. • A debtor owes Child Support, Gov’t backed student loans, tax liens, other excluded debts. PERSONAL GUARANTEE – If a debtor claims bankruptcy for a credit card debt, both entities must be bankrupt to discontinue collections. If the person filed bankruptcy and the business is still active, the business is responsible. If the business filed bankruptcy, the PG is still responsible. The only exception is under certain circumstances where the PG is the owner and the business was a sole proprietorship, or the PG was self-employed, which means the person and the business are one. 34
  35. 35. Note: While a debtor may not be protected from collection efforts in these circumstances, they are protected for the duration of the bankruptcy from LEGAL proceedings. In the following scenarios, apply what you have learned and explain how you would respond so that you are in compliance with the letter and spirit of the law, but are also providing the best collection service for our clients. 1. You have dialed a phone number that was provided by our client as the contact number for a consumer debtor named John Smith. When you call, the voice mail identifies the Smith residence, but does not specifically say “You have reached John Smith.” Is it okay to leave a message at this number? Why or why not? 2. You have dialed a phone number that was provided by our client for Jane Doe, but instead reach the rental office of an apartment complex. The receptionist confirms that Jane Doe is a resident and asks if she can forward a message to her on your behalf. Should you leave a message with this person? 3. The contact number provided to you reaches the debtor’s employer. The employer demands to know why you are calling. What should you tell them? 4. You have called a debtor and begun a talk off with John Q. Debtor. After you have delivered the talk off and the MM, the man advises you that he is Mr. Debtor Sr. and it is Mr. Debtor Jr. that has a debt with our client. Have you violated the FDCPA? 5. You have made contact with a consumer debtor. You have given the talk-off. When you ask the debtor their intentions, they say something rude and hang up on you. Would it be a violation of the FDCPA to call them back right away? 6. You call a phone number provided for a debtor named Bill Nopay. When you call a man answers and refuses to identify if he is or is not the debtor. How can you handle this situation so that you are in compliance with the FDCPA, without letting our client down? 7. You call Bill Nopay again a few days later (Bill lives in Massachusetts, by the way). This time, his wife answers the phone and confirms he lives there but will not give him the phone unless you tell her why you are calling. What should you say? 8. You call ABC Speedy Delivery Service, Inc. regarding an unpaid debt. You speak to the location manager who very rudely advises you that he is invoking his right to cease and desist, demands your name and physical location, and threatens to file a complaint with state attorney general of your state and his, the Better Business Bureau, the Federal Trade Commission (FTC), and your direct supervisor if you continue to harass him and his staff. How should you respond? 9. You have had a good call with a debtor. You gave the talk-off and the minimiranda. You offered a settlement and the debtor accepted. You are just about to finalize the deal, when the debtor asks you for written confirmation from our client that the debt will be removed from their credit entirely once they pay. How should you respond? 10. You have contacted a debtor and the debtor directs you to their bankruptcy attorney. When you contact the attorney, he states that the debtor filed a 35
  36. 36. Chapter 13 bankruptcy and the case was discharged, but the debt you are calling about was not included. What should you do next? 11. You have contacted a business debtor regarding a debt for a credit card, the last payment having been made in November of 2004. When you contact the company, you are told that all bills related to your client were covered under their bankruptcy. When you receive the bankruptcy notification they fax, it shows that the bankruptcy was discharged in May 2001. What should you do next? 12. You have contacted a consumer debtor who refers you to his bankruptcy attorney. The bankruptcy attorney advises you that the debtor’s business is filing bankruptcy. What additional information do you need from the attorney and what are the possible next actions based on what the attorney says? 13. You contact a consumer debtor, give the talk-off & MM and the debtor immediately asks you for copies of his contract, copies of invoices, and a copy of the contract between RMS and our client. How should you respond to this request? 14. A debtor in the state of Massachusetts has agreed to a settlement but can’t make the first payment for at least 30 days. What should you do? 15. You call a consumer debtor who said he is not paying because he is planning to file a Chapter 7 bankruptcy on his over $100,000 in debt. He has not retained an attorney yet. We represent JP Morgan Chase and in reviewing his credit report, you see that his debts are as follows: a. $10,000 to JP Morgan Chase for a Charged off credit card b. $150 to Hollywood Video for an unreturned videos/DVD’s. c. $750 to local hospital for medical bills d. $84,000 to Sallie Mae (4 loans for $21,000 each) all charged off e. $10,000 to Lehigh County for unpaid property taxes (Tax Lien) How do you proceed with the conversation? 16. A debtor tells you she is represented by an attorney, gives you the phone number and address for the attorney and hangs-up. You contact the attorney who advises you that he represents the debtor for a Workman’s Compensation case and knows nothing about this debt. How do you proceed? 17. A debtor tells you she is represented by an attorney, gives you the phone number and address for the attorney and advises you that her attorney is very busy and slow to return calls. That was a month ago. You have been calling the attorney twice a week for the past four weeks with no response back. What do you do? 18. You call a debtor at 7:00pm at home. The debtor is not in but the wife tells you that the best time to reach him is at his work number at 5:00am PT. She explains that his work number is a cell phone and he is a contractor. From 5:00am to 6:00am he is loading his truck and preparing for the day’s jobs. The debtor is a consumer and you are calling regarding a consumer debt. How do you handle this? 19. You call a debtor named Jim Smith in Massachusetts. Someone sounding like a man named “Mark” answers and says that he is Jim’s spouse. Realizing that you are uncomfortable with his explanation, Mark goes on to say that this happens all 36
  37. 37. the time, that Massachusetts is the only state that allows same sex marriages, and that you are permitted to speak with him as the spouse. What do you do? 37
  38. 38. Unit 2 The Art of Collecting Section 1: Message and Talk-Off Scripts The scripts on the following pages have been developed by management and refined through experience. Each script is designed for maximum results based on the intended audience, and to be compliant with any laws governing collections. As a collector in the Financial Services unit, you will be expected to do the following: • • • • • • Memorize each script Demonstrate understanding of each script Recite each script so that it doesn’t sound rehearsed or rote Analyze situations to determine which script is appropriate Make use of the scripts in different situations Evaluate your delivery and tailor it to each debtor The message scripts are written to elicit a call back. The best way to make sure a debtor DOESN”T call you back is to leave a bad message. For this reason, it is important to speak slowly and clearly. You cannot be assured of the quality of the recording on the other end. Assume the quality is poor, and leave a message that can be understood regardless of the quality of the recording device. The person retrieving the message will need to write down the information you are leaving. Especially when saying the phone number and claim number, slow down. A good test is to write the numbers as you say them a few times. This will help you learn the pace at which you need to say them. The Talk-Off script is the most important script. It accomplishes a few different things: • • • • It identifies you and RMS as required by the FDCPA (for consumer debts). It identifies the creditor, the amount due, and the status of the debt. It sets the tone for the call and, if delivered well, establishes you as the authority figure. It gives the debtor the opportunity to state their situation opening the dialog for you to work with the debtor to bring the account to resolution. There are different scripts for consumers and for businesses. Remember, the FDCPA defines a consumer as “any natural person obligated or allegedly obligated to pay a debt” and a debt as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, [etc.] which are the subject of the transaction are primarily for personal, family or household purposes.” This is the standard you will apply when deciding whether to leave a consumer message or a commercial message, or to use the consumer or commercial talk-off. Initial Contact Your initial contact must include the following: • Your name and the name of the company you work for • The name of the creditor on whose behalf you are collecting • The amount of the debt • Request for payment in full (PIF) Let’s review the scripts: 38
  39. 39. Message Scripts - Consumer MESSAGE: This message is for (DEBTOR FULL NAME). If you are not (DEBTOR FULL NAME) then please hang up or disconnect this call now. If you are (DEBTOR FULL NAME), then please continue to listen to this message. By continuing to listen to this message, you acknowledge that you are ((DEBTOR FULL NAME). (DB FIRST name ONLY), you should not listen to this message in the presence of other people so they can hear it as it contains personal and private information. There will now be a three (3) second pause in this message to allow you to listen to this message in private…. This is (COLLECTOR NAME) from RMS. This communication is from a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose. Please contact me at 1-866-604-4414 to discuss this important, but personal business matter. TALK-OFF: Remember the MINI-MIRANDA Hello, my name is your name . I'm calling from RMS regarding a claim that's been forwarded to my office against you…(PAUSE), on behalf of a client I'm representing. It’s regarding the MasterCard/Visa you had with Original Creditor Name . Before I go any further, FEDERAL LAW REQUIRES ME TO ADVISE YOU THAT THIS IS AN ATTEMPT TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE, and THIS CALL MAY BE MONITORED AND RECORDED FOR QUALITY & COMPLIANCE PURPOSES. Do you know what your balance is right now? Were you aware that it had come this far? WAIT FOR DEBTOR TO RESPOND At this point, your balance is $_______, and my client is asking me to contact you to determine how you plan to pay for this in full, pursuant to the cardholder agreement you signed. Rather than making a rash decision, I wanted to contact you first to find out what your intentions are. Can you tell me what happened here? Note: The FDCPA requires you to state the mini-miranda on the first contact, and to identify yourself as a debt collector on each subsequent contact. Even if someone else has already spoken to a debtor, you should give the mini-miranda if it is your first contact. 39
  40. 40. Scripting - Commercial MESSAGE on voicemail This message is for ____________. This is __________, and I’m calling from Receivable Management Services. We are a D&B strategic partner & you’d probably know us by our former name, D&B Receivable Management Services. Please contact me immediately at 1866-604-4414, again that’s 1-866-604-4414. When you call, please reference your file # _____________. Today is ____________, please contact me immediately. MESSAGE on voicemail - DEADLINE This message is for (NAME OF COMPANY OWNER OR LEGAL COUNSEL). This is ___________, and I’m calling from Receivable Management Services. As you are now aware by our numerous letters and phone calls, a complaint has been forwarded to us against you by our client (CLIENT NAME). Be advised, if I do not hear from you by 5pm EST on (date in 2 business days), I will be forced to advise my client that an amicable resolution is not possible, and recommend that further collection activity take place against you. To avoid further negative action, please contact me at 1-866-604-4414, again that’s 1-866-604-4414. When you call, please reference your file # ______________. TALK-OFF “Live” Business or Responsible Party I’m calling from Receivable Management Services, formerly known as D&B Receivable Management Services, and I’m contacting you regarding a claim that’s been forwarded to my office by our client, _____________ in reference to the Business Card account. Be advised that under certain circumstances, Receivable Management Services may report information to D&B for inclusion in the Business Information Report, which, most people refer to as their company’s Credit Report. I wanted to contact you first in an effort to resolve this account amicably… Were you aware that this account had been forwarded to us? Did you get the mail we sent to ___________ address? At this point, the account balance is __________ and my client is asking me to contact you to determine how you plan to pay for this in full, pursuant to the cardholder agreement you signed. Or, whether I should recommend proceeding against you with further collection activity. Rather than making a rash decision, I wanted to contact you first to find out what your intentions were. Can you tell me what happened here? 40
  41. 41. Section 3: Setting yourself up for a good outcome The object of every collection call is to get payment in full. Sometimes this isn’t possible, but you need to start assuming you will achieve that goal. You will need to evaluate in the moment what is possible and strive for the best possible outcome. The possible outcomes in order of most favorable are: • Payment in Full (PIF) • Settlement in Full (SIF) • Payment Plan for Balance in Full (PPA-Payment Plan Arrangement) • Payment Plan for Settlement in Full • ***All of these are dependant on each client’s requirements. Some clients may not authorize SIF or PPA. There are certain things that you can do to set yourself up to succeed in this: • Establish yourself as the authority figure in the relationship. Let the debtor know you are calling to hold them accountable for a legal obligation they entered into. If you deliver the talk-off correctly, you will set that tone. • Educate the debtor. This includes: • • Making the debtor understand the difference between our collection agency and their creditor. • Acting as a financial advisor to identify untapped monetary resources the debtor may have that can be used to pay the debt. • • Making the debtor understand the seriousness of the legal obligation they entered into. Advising the debtor of the consequences of non-compliance. Set realistic goals and deadlines • Set the expectation that they will call you back and not the other way around • Create a sense of urgency in every contact • Only make commitments to them that you can keep 41
  42. 42. Section 4: Consumer Collections Overview The FDCPA governs all consumer collections. In order to be successful you must observe the FDCPA, but the FDCPA serves to tell you how to be compliant with the law and what you cannot do when attempting to collect a debt from a consumer. Here’s what you must do: Listen Respond Appropriately Maintain Control There are two types of debtors. There are debtors that have not paid because they think they can’t, and there are debtors that have not paid because they think they can get away with it. The most common reason that consumers do not pay a debt is due to some change in their circumstances. Perhaps they became ill, went through a divorce, or lost their job. No matter how compelling of a reason that you are given, it does not change the contractual obligation that the person entered with our client. Most people want to pay their debts and maintain good credit. The consumers with whom you will work have not been able to solve their financial problems on their own. For some, this may be their first experience dealing with a collector at a collection agency. For others, they may be receiving numerous calls from other creditors or collection agencies and you may be in competition with them to get paid. The smaller group of consumers consists of those that do not pay their debts because they think they can get away with it. Be very careful with these debtors. You need to convince these debtors of their legal obligation to pay their debt. These debtors often have a detailed knowledge of the FDCPA. Do not allow yourself to be baited into a violation. On the following pages we will review some of the common consumer objections to paying a debt and the rebuttals that you can use to overcome them. We’ll also review sources of funds that you can explore to locate funds for the debtor to pay the debt. 42
  43. 43. Section 4: Consumer Objections and Rebuttals The last line of each of the Talk-Off Scripts is “Can you tell me what happened here?” Every debtor has a story that they think is unique and should mitigate their obligation to pay. The bottom line is that a contract is a contract. The debtor that you are contacting signed a contract that stated that they would pay. There is no exception for a rainy day, or even a catastrophe. The following are some common objections debtors will give you as to why they cannot or will not take steps to meet the legal obligation they entered into: OBJECTI ON REBUTTAL Don't k now w hy I ow e it . You entered into a legal and binding con t ract which stated that if at any time you defaulted, you would be responsible for paying the balance I N FULL, UPON DEMAND. You defaulted. And, you never paid it back pursuant to the agreement you entered into freely. At this point we need to determine your willingness to repay this or subject yourself to “Further Collection Activity.” I’m sorry to hear that. I hope (whatever the problem is) is better now. The fact remains that you signed a legal and binding contract that if you defaulted, you would be responsible for paying the balance I N FULL, UPON DEMAND. At this point, we must determine your willingness to repay this or subject yourself to “Further Collection Activity.” That's a voluntary payment program and you could default again at any time. You will need to borrow from someone, and make payments back to them 1. You signed a legal and binding w r i t t en cont r act stating that you would make the payments voluntarily, and you didn't. My client certainly can't accept your commitment to make payments, verbally over the phone, which holds even less weight than the original signed contract. 2. If you had really wanted to make payments, you would have contacted my client months ago to offer payments. 1. What's going to happen between now and then that will enable you to get the funds? 2. What avenues do you plan to investigate to get the funds? 3. Everyone in the world is a phone call away. It shouldn’t take more than a day or so to make a phone call. The divorce decree DOES NOT PREEMPT THE ORI GI NAL CONTRACT you entered into. Your attorney should have explained that to you. While your spouse may be responsible to you for this pursuant to the divorce decree, you are still responsible to the creditor under the original agreement. You can go after your spouse later using the divorce decree, but the Settlement will not be available then. ( DO NOT refer the DB to talk to their divorce attorney unless absolutely necessary. This is a common DB stall tactic. I f they insist, get the attorney on a conference call to expedite the process. The attorney will likely not want you on the phone with their client but at least you know they have made contact with the attorney.) 1. Apologize for their loss & advise them that you would like to ensure that they receive no more calls. To do so, you will need to obtain a copy of the death certificate. Ask for it directly unless the client directs otherwise. Give plenty of time and be very empathetic. NO FOLLOW- UP, we can check Social Security Records online. 2. Ask for a copy of the Af f idavit of Fraud. Explain that if they had handled the loss appropriately, they should have only been responsible for a limited amount of liability. Som et hing bad happened… CCCS Can only m ak e Paym en t s Needs excessive t im e t o call back . Divorce Decr eepushing on ex -spouse Debt or is Deceased Claim s f raud: ( lost t he car d) 43
  44. 44. Section 5: Educating consumer debtors on sources of funds As a collector, quite often your job is to educate a debtor on how they can pay a debt. Sometimes the debtor cannot imagine a way out of the problem they are in. Often they may be embarrassed about the financial situation they’ve gotten themselves into. Educating a debtor consists of two things. Identifying a source of funds they can tap into to pay their debt, and making the prospect of doing that seem possible. The following are some sources of funds that consumer debtors can use to pay a debt: SOURCE Fr iends & Family ( most common) WHAT YOU NEED TO KNOW TO MAKE IT WORK Have you borrowed from them before? For this much? And paid them back on time? So it looks good that they will be able to help you out then. Pay check ( of t en This is weak because the debtor will say his pay was short, took of f er ed by debt or , out too many taxes, pay was delayed, had to use to pay for car, but w eak) etc. If debtor has been at the POE for many years and the company is small or medium sized, this is an option. Very small companies may not have cash flow and large companies are too rigid. A great source if the plan allows it, but can take 4-8 weeks to complete the paperwork & receive a check. Have the DB borrow from someone and pay him/her back when they get the 401k 401K/ Ret ir ement money. If this is the only option, confirm with the Plan Disbur sement Administrator. A great option, but debtor needs enough equity to pay off all debts & 1st mort. Usually not even considered if mortgage is less Ref inancing Home than 5 years old. See the next page for more info. This is another great option, but the debtor's credit must be somewhat decent or the DB will need a cosigner, or better yet, someone to get the loan for him. Banks are most strict. Credit Unions are usually smaller and more "homey". They will take more into account, but take longer for answers (loan approval committee). Least strict are finance companies. Can be found in Per sonal Loans the yellow pages under "Finance" or "Loans." Almost everyone has them, but they are often overlooked for their Lif e I nsur ance cash value. If DB has Permanent Life insurance Whole Life, Policy Universal Life, Variable Universal Life. St ocks, Bonds, Kids' College Less likely, if they had these sources, they would have been Sav ings liquidated by now. But, it's worth asking. Adv ance f r om Wor k 44
  45. 45. Refinance Process **IMPORTANT Loan must close at least seven calendar days prior to EOM.** - Collector Pre-qualification o Do you own your home? For how long? o Is the mortgage in more than one name? o Single family, Multi-family home, Mobile home? Trailer? o Second mortgage, home equity? o Liens, encumbrances, clear title? - Application o Try to steer to company we know does B & C credit loans o If already in process, get name & number of loan officer and company and permission to discuss with loan officer & find out where they are in the process. o TIMELINE: Often done over the phone in 15 minutes - Appraisal o Loan officer will order appraisal. o TIMELINE: Usually a couple days, can take up to a week - Title Search o Loan officer will order the title search. o TIMELINE: Usually only two days - Underwriting o After all preliminary work above is done, the loan will go to underwriting. This is where the loan gets through “Final Approval” o TIMELINE: Usually 1-2 days - Closing o After underwriting is complete, the loan officer will contact the debtor to coordinate a convenient time to close the loan. The debtor almost always must go to sign in person. o TIMELINE: There is no definite time frame for this. It’s all up to the debtor. - Rescission Period o Federal Law requires a three day rescission period o Some companies (Ameriquest) require a seven-day rescission period. o TIMELINE: 3 days minimum, but could be up to seven days - Funding o The day after the loan comes out of rescission, it “funds.” Funding is when the lending institution actually bank wires the money to the branch to cut the check to the debtor. o Funds can be sent directly from the loan company to us on this day, or a check may be cut to the debtor. We always prefer the loan company to send us the funds directly. If funds are given to the debtor, we have to trust the debtor to send them to us. o TIMELINE: This takes only one day 45
  46. 46. On the next page you will see a flow chart of how a normal re-finance works. 46
  47. 47. 47
  48. 48. Section 6: Commercial Collections Overview Many aspects of collecting from businesses are the same as collecting from consumers. If you are collecting on a business account with a personal guarantor, you will be collecting from the person and the business. You may encounter different types of obstacles to achieving your objective, and the solutions to those obstacles may be different from strictly consumer accounts. What those obstacles are and your responses will relate to the debtor business. Where with consumer debtors there are debtors that “can’t” pay and debtors that “won’t” pay, with commercial debtors, you could simply need to figure out how their internal process broke down that prevented the debt from being paid. Here are some of the major differences between consumer collections and commercial collections: CONSUMER COMMERCIAL It’s personal. You are dealing in terms of a person’s It’s not personal. The funds come from the own funds. business and likely do not directly impact the person handling the issue. Intent vs. Ability are the major factors Intent & Ability can be factors, but their business practices may also be a factor One on one contact – the consumer. Possible multiple contacts and escalation is possible. Governed by FDCPA (Fair Debt Collection Practices Not governed by FDCPA. Businesses are Act). not protected. When collecting from businesses, it is important to remember that the FDCPA does not apply as we learned in Unit 1. How does this affect what you do? You can speak to anyone at the business in detail about the debt. There are no restrictions on contact. There is no possibility of “overshadowing” the initial 30 day period, so your first call, on the first day can be a demand. If the debt is a business debt, the Personal Guarantor is not afforded protection under the FDCPA because the debt you will be collecting is not for personal, family, or household purposes. Breaking through to the right person Before you can successfully deliver a talk off, you must first reach the person at the business that will be able to resolve the debt. If you are lucky, the file will have the direct phone number for the owner or president of the company, but usually, this isn’t the case. More often, you will encounter an auto-attendant phone system or a receptionist. Auto-attendant systems: The sophistication of the system will be dependant largely on the size of the company. Your objective is to get through to the right person, but if you can’t determine it from the phone system, any person will do. Always try to hit “0” to reach an operator (you may need to do this 3 times). If this isn’t an option, use whatever options are available to get any live person on the line. If your only option is to dial an extension or spell a last name, choose the latter option and attempt common names like “Smith” or “Jones” until you reach someone. Receptionists: Receptionists can be a valuable source of information. Probe the receptionist for details about the business. Get him or her to provide you with the name, title, and direct dial number for the person you will be speaking with, and confirm if that person is available. If the receptionist is unhelpful, call back and ask for the Accounts Payable Department. This is a last resort, because A/P did not get the debt paid up to now, but they may be more cooperative. 48
  49. 49. Section 7: Laying the groundwork Each business is unique. In order to be successful you need to ask questions to learn about the debtor business’s individual sitiation. Here are some things you will want to ask about during your calls that will help you to handle commercial accounts: What is the legal set-up of the business? • • • Sole-proprietorship – Usually these are family type businesses, or the debtor may consider themselves to be “self-employed.” When you are collecting from a business like this, it is expected that you will review both the consumer and the commercial sources of funds. You can assume you are probably dealing with a sole proprietorship if the business line rings to a home or if you are referred to speak to a family member. Partnership – Each partnership is unique. You should work both the consumer and commercial sources of funds with any available partners. Corporation, LLC. – Only the commercial sources of funds will apply. The owners, board members or executives of a corporation or limited liability corporation are personally insulated from any debts incurred by the business. You can assume that you are dealing with a corporation if you are directed to a department, or if there is an executive group. What does the business do? If this isn’t apparent, ask. This will help you to determine what sources of funds will be applicable and to assess the prospects for payment. For example, seasonal businesses will go through peaks and valleys but may have large receivables. Retail businesses may not have large receivables but may have a more steady income over all. What are their payment processes? • • • Do they have an A/P or bookkeeper that just needs a bill? Do they have a series of approvals that are required? When do they cut checks? You can ask anything about a business as long as it is professional. 49

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