How do we lessen the risk of being sued? Reconciliation!

In today’s debt-collection world, creditors and debt collectors can pay significant legal fees to defend themselves when they really didn’t do anything wrong or harmful to a consumer, but there was an error in the billing/accounting/payment process.  In some instances, debt collectors are paying thousands in settlement demands just to conclude a case that will cost three times as much to defend.  At the root of many of these issues can be problems with the debt collector having the incorrect balance in their system.  Maybe a payment has been made directly to the creditor and not reported to the collector.  Maybe a credit had been posted to the account.  Maybe an employee of the creditor has made a new arrangement with the consumer or debtor and not kept the collector “in the loop”.  In cases like these, the collector could be collecting a debt that is incorrect or not owed, and found in violation of the FDCPA.  And the creditor may be liable for defense costs as well.  How can we avoid these costly issues?

One way is to perform regular reconciliation.  Maybe it only needs to be done annually, maybe weekly.  In either case, it is good practice to regularly create a file of accounts that you think you have sent to collections and compare the names and balances due to what the collector has in their system.  At Southern, we have this process in place with many of our clients, but not most.  It can be a lot of work for sure, especially if your system cannot create the list easily.

But it can be very worthwhile if your firm has hundreds of accounts in collection, you have changed software once or twice, or staff has turned over since using your collection agency.  When things change, processes can break down or be forgotten.  If you are interested in setting up regular reconciliation with Southern, please contact your Client Consultant for more information.  We want to help keep everyone out of court!

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