The golden rule for granting credit is “collect it when you do.” Collection is the single most important part of the credit industry. You need to convince the Borrower why you should pay your bill and why it should be kept in a current state when you sign the contract.

One of the most important factors in collecting your account is that the borrower knows that he or she is current and has good credit. When you need another purchase, you are more likely to get that order because your account is in good standing. The borrower does not want to go through the credit check process and risk being rejected.

Law Collection

All companies do not like the task of making collection calls. It is an unpleasant task of granting credit. You must remember that there are laws that control the ways in which you can get paid and when. The Fair Debt Collection Practices Act (FDCPA) is a federal law that outlines the ways you can collect your accounts. This act is universal in all 50 states. You may not use abusive, deceptive, or unfair debt collection practices. You must use your own name and cannot represent that you are a lawyer unless you are. If you contact a third party to obtain information such as an address, a phone number, or a place of work, you cannot inform them that the debtor owes you money.

It should detail the amount owed, who to contact, and what action to take if the debtor is disputing the debt or a certain part of it. If the debtor sends the collector a letter disputing the debt within 30 days, the collector must cease contact with that part of the debt until they send corroborating evidence. Then collection efforts can continue. Also, a collector cannot contact a debtor after receiving a letter from the debtor instructing the collector to cease his efforts. But the debt collector can continue his efforts through an attorney or by filing a lawsuit.

Suggested methods for collecting

A good collector never loses his composure with an account. You must communicate in a very professional, friendly and compassionate manner. Never use profanity or misleading statements. Never threaten a borrower in any way, whether by verbal or material means. Never joke about a collection. Always use your real name and be available when that borrower calls you, never forgetting that you must convince the Debtor that they must pay you.

It is useful to analyze why an account has expired and requires collection activity. Let’s look at a couple of reasons. The most common reason is that the Borrower has over-extended his ability to pay. This can happen due to uncontrolled shopping or due to a condition beyond your control, such as illness or an accident. You must remember that if the borrower had sufficient funds available, the account would probably not be in default. However, late payment could also be due to a problem with your product or service. You must determine why an account has become delinquent and work with them to reduce it to a zero balance.

If crime is caused by an uncontrollable spending habit, it is tackled firmly but compassionately.

Initiate payments

The most important thing is that you make the debtor in the habit of paying again on a monthly basis. Because there is not a sufficient amount of funds available to make your regular payments, try to reduce them to an acceptable payment amount that can be made regularly. Receiving money each and every month is essential in collections, particularly when the account is more than 90 days past due. You must make the payment amount greater than the interest charges for revolving accounts. The debtor will eventually pay the balance. Because interest is charged monthly, the amount of the payment must be sufficient to pay the interest and a portion of the principal balance. Only then will the account have a payment life cycle.

If there is a dispute, you should investigate the reasons and verify your account as soon as possible so that the debtor can continue to pay. If the delinquency is caused by uncontrolled purchases, you must arrange for a smaller payment, but it is important that a payment is made every month. If you skip a month, you should firmly but politely discuss why you didn’t. Many debtors who cannot pay the full payment will not make any payments. They think they cannot pay less than the regular scheduled payment amount, so they do not receive anything instead of partial payments. It is better to receive a partial payment than no payment. Many people cannot accumulate enough money to pay once a month. Accept weekly or biweekly payments. The most important part of collections is getting the debtor back into the habit of paying.

Show personal interest in that account and make encouraging comments when you receive a payment. With CreditStar you can insert a personal message in the description line and it will be printed on the next statement. For example, you could say:

“Thank you for your payment”,

“Your special effort is appreciated”,

“I know how hard you are trying to clear this balance, THANK YOU”, or

“You are doing very well, thanks for the payment”,

You can probably come up with a lot of short statements that fit the situation. Words of encouragement and appreciation are a great support in collecting bills.