Tag Archives: Fair Debt Collection Practices Act

A Warning You Need to Read: Don’t Believe in Something For Nothing!

14 Jan

Many businesses have been told by their collection agency that they can provide free collections to them simply by adding the percentage fee onto the debtor’s balance as “the cost of collections”  In other words, promising prospective customers “something for nothing.”  With the high cost of collection agencies, this is a very tempting offer for a business who needs to collect their money and hesitates at paying an agency their typical 30-50% fee for collecting.

DON’T BELIEVE IT!!

First of all, the match doesn’t work anyway.  If the fee is 50% and the agency or the client adds the 50% back into the bill before it is collected, the client will only receive 50% of the new balance, which is not the full amount (only 75% of the original bill)

More importantly than that, the agency is tempting you to violate Federal Laws against usury.  The agency is setting themselves, AND POTENTIALLY YOU, up for a law suit and stiff fines and penalties.  Even if you put a statement to that effect into your financial policy, you may not charge these percentages to recoup your collection fees.

Please take a moment to read this article, copied from the ACA International (American Collector’s Association) website about a recent court case against such an unscrupulous agency.

Court Rules Against Collecting Percentage-Based Fees

Eleventh Circuit Court of Appeals ruled that charging consumers a percentage
of their account balance as a collection fee is a violation of the FDCPA unless
the consumer explicitly agreed to pay a percentage-based fee.

In a Jan. 2, 2014, ruling, the Eleventh Circuit Court of Appeals found that a collection
agency may not collect a fee based on a percentage of the account balance if the
original contract between the consumer and creditor did not specify the consumer
would be responsible for a percentage-based fee.

In the case, Bradley v. Franklin Collection Service Inc., the consumer plaintiff had
signed a patient agreement when receiving medical treatment that stated, “In the
event of nonpayment… I agree to pay all costs of collection, including a reasonable
attorney’s fee…” The creditor subsequently added a 33-1/3 percent fee (reflecting
the contractually agreed upon fee between the creditor and the collection agency)
before forwarding the account to the collection agency.

The court ruled that the plaintiff, “agreed to pay the actual costs of collection; his
contractual agreement with [creditor] did not require him to pay a collection agency’s
percentage-based fee where that fee did not correlate to the costs of collection.”
The court found that the percentage-based fee, assessed before the collection
agency’s attempt to collect, was not related to the agency’s actual cost of collection,
thus breaching the agreement between the consumer and the creditor. Therefore,
the court held that the collection agency violated the FDCPA by collecting the 33-1/3
percent fee when the consumer only agreed to pay the actual costs of collection.

© 2014 ACA International

In other cases, medical practices, along with the agency, were charged under racketeering laws for the very same offense.  The fines and penalties that they were required to pay were astronomical.

Please, let me show you a way to avoid the percentages charged by these collection agencies, without running afoul of the law, and while collecting more money than they do in the process.

Respond to me through the form below and I will rush you the information on how to avoid these kinds of unscrupulous methods and still collect more of your hard earned money.

Dispelling Collection Myths

25 May

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ACA (American Collectors Association) International seeks to dispel commonly held myths about the credit and collections industry. Today more than 30 million consumers have delinquent or defaulted accounts under collection, averaging $1,400 each.

“Repayment of consumer debt is the lifeblood of America’s credit-based system and vitally important to the national and state economies,” ACA International Chief Executive Officer Pat Morris said. “It helps ensure that affordable credit is available, goods and services remain affordable, sustains jobs and supports keeping taxes low.”

As an industry, third-party debt collectors help employ more than 300,000 people, pay nearly $2 billion in federal, state and local taxes, donate $85 million and volunteer 650,000 hours to charitable organizations in local communities. “Whether a small town hospital, business or a city struggling to recover taxpayer owed dollars, organizations large and small rely on the recovery of rightfully owed consumer debt,” Morris said.

Myth 1: Avoiding a Debt Collector Makes the Debt Go Away. Consumers who ask debt collectors to stop contact or choose not to respond to calls or letters often mistakenly believe it means their debt has been eliminated. Avoiding contact will not erase a debt. Instead, consumers should communicate with collectors to discuss the account, verify its accuracy and work on a plan for resolution. If consumers don’t owe the debt, communicating with collectors can help put a stop to calls or letters.

Myth 2: Consumers Don’t Have Rights in the Recovery of Past Due Accounts. The collection of consumer debt is one of the most heavily regulated industries in the United States. Consumers have important rights under a number of federal and state laws. For more information about what to do if contacted by a debt collector please visit www.askdoctordebt.org.

Myth 3: All Debt Collectors are Bad. Just as “all consumers” aren’t the same, neither are all debt collectors. Most are committed to professionalism, training and customer service. When it comes to the “bad guys,” we want to put them out of business just as consumers do. ACA International and its members continue to work with state and federal policymakers, regulators, courts and attorneys general to comply with the law and hold accountable those who do not.

Myth 4: It is Boom Time for Debt Collectors. It’s no secret that consumers have struggled financially in the current economy. Despite an increase in defaults and delinquency, the inability of consumers to repay rightfully owed debts trickles down to those charged with their recovery.

© 2012 ACA International. All Rights Reserved. Reprinted with the express written permission of ACA International

Top 10 Tips To Improve Collections (Part 8)

20 May

It’s a problem faced by virtually every business and medical practice – how to deal with customers / patients who pay their bill late, or not at all.  While customers and patients expect prompt and professional service, they don’t always meet the same standard when it comes to paying their bill.

Accounts not paid promptly can severely impact the cash flow of a business or practice.  A clearly defined and carefully communicated, yet diplomatic payment policy, may help avoid difficult collections situations.

Tip #8

ENSURE YOU ARE COMPLIANT WITH FEDERAL, STATE AND LOCAL LAWS

Collections, both in-house and outsourced, are governed by federal, state, and sometimes local laws and regulations.  In many cases, businesses and medical practices are governed by the same laws as are collection agencies.  Ignorance of the laws and regulations that govern your activity is never an excuse, nor a defense, for breaking them.  For example: Calling to collect on an account at an odd hour or disclosing to a third party that a person owes your business/practice money are just a couple of the collection practices that can cause serious repercussions.  Become familiar with the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, HIPAA (for medical and dental practices), and any state and local regulations pertaining to your location, or partner with someone who can help you remain compliant.

For more information on staying compliant in following-up on slow-pay and delinquent accounts, contact me through the form below or follow this blog for regular updates.

Did You Open Your Business To Specialize in Collections?

8 May

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Entrepreneurs, specialists and CEO’s who operate companies did not open their respective businesses to collect on past due accounts. Each started their business to provide a good or service to fill a need. Often, there is not sufficient time, resources or understanding of the best way to collect on past due payments. Many wonder:

  • How soon after the first invoice do you send the next?
  • When do you call?
  • What do you say?
  • How do you protect the relationship you worked so hard to build?
  • Are there laws regarding collections?

As a result of unanswered questions, lack of processes and time, many debts go unpaid and ultimately factor into business failure. Company owners can lose traction while trying to split time between managing a shortfall of cash flow and collecting on past due payments while also attempting to concentrate on operating and growing their business. This is when companies should rely on the experts at collection agencies to recover delinquent accounts.

A company who must send their clients to collections no more wants to do so than the client wants their account sent. Unfortunately this step is sometimes necessary. When a business or company provides credit for goods or services they expect to, and should, receive payment. Multiply the effect of bad debts, late payments, slow paying and non paying client across thousands of businesses across the country and it is easy to see the negative impact this could have on the total economy.

A debt collection agency can assist in recovering debts and improving account receivables so business owners and operators can focus their energy and time on growing and running the business. Collection agencies possess the systems, resources and trained personal to improve cash flow. A good agency will have researched and studied consumer behavior and know the proper steps to take when dealing with the different types of debtors many companies and business encounter today.

When selecting a collection agency, make sure they are compliant with the varied and ever changing state and federal regulations that govern this highly-regulated industry. The wrong choice in a collection agency could result in large fines as a result of negligent actions with regard to state and federal regulations.

For more help in selecting the proper agency for you business, medical or dental practice, contact me.  I’m happy to help.

 

Is Your Collection Agency Putting Your Medical or Dental Practice at Risk?

6 May

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The collection agency industry is highly regulated and there are numerous laws on the books designed to protect consumers, which make it more difficult to collect. While it costs agencies more to be legally compliant and hinders their collections efforts, not complying can lead to class action suits and sanctions against the agency (and possibly their clients) that are more costly in the long run if not fatal to the agency’s very existence. Lets examine how this affects your practice.

The Laws You Know

Most Practice Administrators are familiar with the Fair Debt Collection Practices Act (FDCPA) of 1978 which creates a set of guidelines that collection agencies are required to follow as well as penalties for not adhering to the Act. Additionally, practices are familiar with HIPAA laws and the security requirements of Protected Health Information (PHI).

But Do You Know About These Laws?

Despite having been a law since 1991, most practices are not familiar with the Telephone Consumer Protection Act (TCPA)  which also impacts collections. Among other provisions of the TCPA (such as calls can only be made between 8am and 9pm), the TCPA prohibits the use of automated dialers to cell phones or leaving automated messages on cell phones. While auto-dialers represent a technological efficiency that allows a collection agency to make more frequent calls and collect more money, their use is not compliant with the TCPA when the phone number the patient has provided the practice with is a cell phone. In order to be TCPA compliant when calling a cell phone, it must be manually dialed. Even if a live collector will be connected with the consumer upon pick up, a cell phone can not be dialed using a computer.

Medical Collections Impact

A recent data analysis by Transworld Systems, a large national collection agency specializing in medical collections, revealed that 60% of the phone numbers that their medical practice clients are obtaining from patients are cell phones. In order to avoid fines of $1500 per incident and class action suits, Transworld Systems has enforced strict policies of identifying and separating land line numbers from cell phone numbers. Additional research is conducted to see if the patient also has a land line which can be put on an auto-dialer to obtain better contact rates.

What does all this mean for your practice?

Today with the ever-changing federal and state regulations, you need to ask more questions of your collections vendor to find out if they are compliant with all laws. Ensure your practice cannot be named as a co-defendant in a potential class action suit should your agency be accused of being non-compliant. It is important to have a Hold Harmless Agreement in your collection agency contract where the agency agrees to hold your practice free from responsibility for any liability or damage that might arise out of their collection activities. Ask questions first before you have to answer for shortcuts or missteps later that could result in hefty fines for lack of compliance. It is paramount to ensure your company of choice is an expert in their field who stays abreast of, and quickly adapts to, the seemingly endless stream of regulations designed to protect consumers rights, often at the expense of their creditors.

Here is a sample list of questions to ask your current agency and any potential collection agency you are considering working with:

1.    Is your company compliant with TCPA, HIPAA and familiar with state laws regarding collections?

This is not a yes/no question, they should be able to provide additional information including how often their collectors are re-tested for compliance and how their performance is monitored for compliance.

2.    Does your company perform background checks on collectors in required states?

3.    How are cell-phone calls handled?

If they dont maintain a separate policy for handling cell phone calls, that should be a red flag to you to find another vendor.

4.    Do you know what PHI is and what steps do you take to ensure its security during storage as well as communication with our practice? Ask how they receive data from their clients (do they accept secure electronic encrypted data or do they expect you to fax or mail patient files which are more easily compromised?) Do they provide you with a secure website to view collections status and if not, do they at least have the ability to encrypt emails when attaching a list of status updates which include PHI.

5.    Is your company licensed to collect in all states?

Even if your patients are primarily local to your office, sometimes they move out of state and your agency will have to be compliant with the laws that govern the patients new residence.

6.    Is your company bonded and insured?

Ask for copies of the documents proving bonding and insurance to make sure your money wont disappear if your agency goes out of business, either as a result of poor performance or as a result of a fatal class action suit.

Contact me for a 100% compliant option that will keep you and your practice safe during these times of changing and ever-increasing regulations.

 

 

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