Four Illegal Ways to Attempt to Collect Money Owed to Your Organization

Getting people to pay the money owed to your organization is critical for its financial stability. But questionable practices of the past, along with pressure by consumer advocacy groups, have helped to make debt collection a tightly regulated process. 
An organization’s successful collection tactics begin when products or services change hands. Keeping clear records of contracts and payments, doing background checks, offering payment plans, and communicating clearly up front helps minimize disputes and delays in getting your money. 

However, as we know, there are still people and organizations who don’t pay. When it becomes clear that a debtor isn’t going to pay in a timely manner, you must avoid several key prohibited practices under the laws.

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4 prohibited debt-collection practices

1. Harassment 

   Any unreasonable act that causes the debtor to not be able to have a normal business or private life is not allowed. While the words “unreasonable” and “normal” are somewhat subjective, consider some best practices to avoid a misstep. 

   The 2 for 1 rule says that you are allowed 2 attempts at contact daily and 1 actual contact. Contact could mean actually talking to the debtor or leaving them a voice mail. If you are attempting to contact the debtor less than twice a day and it’s working for you, carry on. If, however, your less frequent attempts at contact aren’t working, you can increase your contact attempts to twice a day and still be within the law. Frequent contact helps keep you on their radar.

2. Statute of limitations 

   Every state gives you a certain number of years within which you can file a lawsuit to get the money owed to you. You must follow the law for the state where the debtor resides. In some states, you can still use phone calls and collection letters beyond this date, so you would need to be sure of the laws in that particular state.

3. Illegal threats

   It’s tempting to say you “will” do something if the debtor doesn’t pay. Reporting someone to the credit bureau, suing them – these are actions organizations have a right to take when attempting to collect from debtors. Tacking on interest or fees (unless in the original contract) is not legal. But your wording is important when applying this pressure. If you’re not sure of your next steps or the timing, it’s better to be vague. Not only does it make it easier for you to uphold your threat, but also helps lead to a conversation where you are trying to be more accommodating and leave the door open for a future relationship.  

4. Illegal third party disclosure

   Nobody, other than you, the debtor, and typically, the debtor’s spouse have any right to know about the debt. Faxes are one source of trouble here because there’s too much possibility that someone other than the debtor could get hold of the information. Always steer clear of any communication that enables someone other than the debtor — their  friends, neighbors, colleagues, or employer — to get that information and use it against the debtor in some way.

Even if a debtor were to give you permission to do one of these things, it’s important to remember to get that permission in writing to avoid any legal repercussions.

Getting the money owed your organization is often a challenging job. While aggressive tactics are sometimes necessary and legal, you’ll want to know the limits of what is and isn’t allowed under the law.