Top Tips To Successful Bad Debt Collection
Bad debts are a huge problem. Bad debt collection is an even bigger problem. When a debtor has stopped making payment months or years ago, the debt is considered a bad debt. This debt can be written off and declared as a loss. The problem is that banks, lending companies, and smaller creditors need to survive. If they keep on declaring bad debts as losses, they will keep losing money. For smaller businesses, it means valuable money that could have been used for operational expenses. More importantly, if bad debt collection doesn’t happen, debtors will assume that their creditors will just let them off the hook.
So, how can a company achieve successful bad debt collection? The key is in the correspondence with the debtor. First of all, make sure that your debt collectors follow the provisions of the Fair Debt Collection Practices Act. Although you’re desperate to get your money back, you’re not allowed to use threats and insults to intimidate the debtor. You want to get paid, not get sued.
Secondly, use all possible venues for communication. You can call, email, fax, or make a personal visit. Make sure that you find a way to communicate with the debtor. Let the debtor know that you are serious about collecting that bad debt. Bad debt collection is about informing debtors that they are responsible for their debts. The best thing you can do to communicate with your debtors is to send collection letters. In these letters, you should indicate the details of the debt – the amount, the transaction information and the original creditor. Provide all the necessary information and attach any other document that the debtor needs to verify the nature of the debt.
Bad Debt Letter
Why letters? The debtor may just dodge your calls, but he cannot escape the collection letter. At the same time, the debtor may be aggressive and defensive when you call. He will keep interrupting you, and you will not be able to give the information he needs to know. In addition, collection letters are valuable documents that can be used as evidence in the event that the matter goes to court.
Debt Repayment Deadline
Thirdly, give a deadline. Be strict and confident. Bad debt collection is about letting the debtor know that you want the debt settled as soon as possible. Don’t ask when it is convenient for him. Say that you want the debt settled by tomorrow. If he says he can’t pay by tomorrow, then you can negotiate. In the end, don’t fall for his excuses. You should try to set a definite deadline.
Also, you need to be respectful. If the debtor finds that you are nasty, you’re just giving him more reasons to ignore you. If you want him to pay, you have to establish a formal but cooperative relationship.
Has Your Debtor Absconded
Dealing with Skip Tracers and Debt Collection
One of the biggest problems that debt collectors face is locating their debtors. When a debtor moves to another house in another state, the collection agency often has no clue how to locate him. So, how do collection agencies track runaway debtors? The solution is easy – they hire skip tracers.
Skip tracers are people whose sole mission is to locate debtors who moved without giving their new contact details to the collection agencies. Sometimes, skip tracers are employed to help legal collectors find the addresses of assets that are to be repossessed.
You may wonder how skip tracers locate people. The process is actually rather straightforward. The easiest way is to use the debtors’ social security numbers. They run the social security numbers through various credit bureaus. What they get are header files from the debtors’ credit files or credit reports. A header file only has basic information like the name, address and in some cases, the place of employment. As little as this information may be, it’s all that the skip tracers need to help debt collectors find their debtors.
If the skip tracer cannot find the debtor through the social security number, he can do a national identifier search. Simply put, this is an old school system that uses the debtor’s last known residence as well as his name to find his new location.
The skip tracer may look through these sources:
Online directories and search engines – The debtor may have accounts in various websites, like myspace, livejournal or facebook. If not, there may be people on the internet who may have written entries about him or posted his pictures.
The Department of Motor Vehicles
If the debtor drives or has a license, it is likely that the DMV has recent information about his whereabouts.
If you know the debtor’s last place of employment, the skip tracer can approach his boss and inquire about his current employment status. Even if the debtor has moved to a different job, the employer may still have information that can help the skip tracer locate him.
Associations and other groups
If the debtor has a specialized occupation, like Engineering or Medicine, he must have membership in certain organizations. The skip tracer will try to search through these groups to find the debtor.
The skip tracer may visit old neighbors, friends and relatives to get some information about the debtor’s current location.
Never Misprepresent Yourself
When trying to get information about a certain debtor, a skip tracer faces a lot of potential legal troubles. In order to prevent these, the skip tracer should not falsely represent himself as a member of law enforcement or a detective. Also, the skip tracer may experience legal troubles if he tries to get the cell phone numbers of the debtors.
Debt Collection Techniques: How to Collect Debt Successfully
Lets get back to getting the money you are owed. The more you know about bad debt collection the better. All of our information is written by people who have been involved in bad debt collection professionally for decades. Learn from them. Bad debt collection is a skill that anyone can learn. You do not need to learn how not to pay.
With Americans owing billions and billions of dollars in debt, both creditors and bad debt collection agencies are feeling the pressure. Debt collectors must employ techniques that will encourage debtors to pay. Successful debt collection techniques will help the collector get the account settled immediately. On top of the pressure to collect debt, debt collectors still have to be mindful of the laws that protect debtors.
So, what are the debt collection techniques that can be used by creditors?
The Bad Debt Call Is Incredibly Effective
A debtor can rarely deny having spoken to you. As a precuser you might want to call the debtor a week or so before a repayment is due. A gentle reminder that you can fall back on.
To collect debt successfully, the debt collector must make sure that he establishes a good cooperative relationship with the debtor. You want the debtor to feel that you’re trying to help and that you’re not out to get him. This rapport can be established by making calls to the debtor. With the right debt collection techniques, you will know how to make the perfect debt collection call.
First of all, open the call by introducing yourself. Formally state your name, the company you work for, and the intention for the call. From the beginning, you want to establish a certain form of authority and credibility. You don’t want to scare the debtor. Instead, you want the debtor to know that you represent the creditor, and you are going to handle this account from now on. The last thing you want is for the debtor to doubt you and start thinking that you may be trying to scam him.
Secondly, immediately ask the debtor about what he plans to do with the debt. Make the debtor explain his situation. Don’t preempt the conversation by asking when he wants to pay. If you do this, the debtor may just give a random dateline which he never really plans to meet. If the debtor refuses to commit to a date or meet your deadline, do not push him. Instead, move on to another topic. Ask about his employment status. Ask about what other loans and credit cards he has.
Thirdly, present options to the debtor. Good debt collection techniques make the debtor feel like he has options, and he has the power to choose how he wants to pay off the debt. If you make the debtor feel like he’s trapped in a corner, he may panic. Establish a calm atmosphere. Make suggestions. Tell the debtor that he can pay using another loan or he can put it in his credit card. A good technique is to give specific options. Since you have asked for his financial background, use the information to present ways for him to settle the account. Now that you’ve presented some options, you can demand for payment in a respectful way.
Lastly, close the call with a confirmation. Whether he agrees to pay or not, ask an open-ended question that will let him explain that he is fully aware of the situation and that he stands by the decision he made.
Always complete any action youm have said that you will do. Never give the debtor a cause to complain. If he has asked for a statement – send it today.