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Small
Business Debt Collections Law Trap |
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by: Joel
Walsh |
When
someone owes your small business
money, you certainly feel like a victim. But did you know that if you
aren't careful, you could break the law by trying to get the money
back?
How to Break a Federal Debt Collection Law
You have a small business, and your bills are coming due soon. You
could easily pay those bills if a few thousands dollars of overdue
invoices were paid. It's time to give your clients a few friendly
reminders…
1. You call up the biggest debtor at his home number. The debtor's
girlfriend answers and you leave the message that you were just calling
to remind her husband about the invoice you had sent last month.
2. You get into an argument over the phone with the next debtor. In the
heat of the moment, you say you're referring the debt to you
attorney--when in reality, you know you can't afford to do that.
3. It's getting late--in fact, it's already after 9pm. But you know
that debtor number 3 tends to stay up quite late, so it's practically
midday for him. So, you cheerfully give him a call and remind him about
the invoice of a couple of months ago.
Congratulations, you may have just broken a federal law three separate
times. Plus, you could be sued for it.
Collections Laws Finer Points
Have you figured out what collections law you broke yet? It's the Fair
Debt Collections Practice Act (FDCPA), the federal law for collections.
Meant to protect consumers from harassment, it has a clear list of
things you can't do. Let's look at what you did wrong in the last
example:
1. Never tell someone other than the debtor that you are calling about
a bill. You can, of course, leave a message that you called. You can
even call someone simply to find out if they know if a hard-to-reach
debtor has moved house. But you cannot under any circumstances let on
that they owe money. Simply leave your name and phone number as with
any other "call me back" telephone message.
2. Never claim to be involving an attorney when you are not. Of course,
this might seem like a soft area of the law, since intentions are
fuzzy. But, for instance, if it's clear that suing to recover the debt
would cost as much as the debt itself, your bluff will be obvious in
retrospect. To be on the safe side, don't ever claim to have involved
your lawyer.
3. Never call before 8 am or after 9 pm, unless you have the explicit
permission of the debtor. But unless that permission is in writing,
you're safer not calling during those hours, anyway.
Unfortunately, not every aspect of the law is as straightforward as
this case. For instance, the law is only supposed to apply to consumer
collections, not business collections. But with home business and
telecommuting blurring the line between work and home, you're better
off following the law's dictates in every case.
Plus, the law has numerous other protections for debtors--or traps for
collectors, depending on your point of view.
Feeling daunted? Before you give up on ever seeing your money again,
consider outsourcing your over-aged accounts receivables to a
professional collections service. After all, there's no law saying you
should let customers rob you.
Please note this article is not intended to give legal advice and may
not be complete or up to date with the most current collection laws
changes.
About the author:
Joel Walsh has written more tips on debt collection laws:
debt collection laws
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