Knock Knock, Who’s there? Not a Bill Collector

For a business owner with a customer that won’t pay an invoice, it might be a compelling thought to pay a personal visit to that customer’s home to demand payment in full. Your invoice will be paid and you might feel some satisfaction going there and collecting it yourself. This may sound like a good idea, but it’s pretty-much illegal.

For decades, creditors have effectively utilized unannounced personal visits at the homes of debtors, and at the debtors’ workplace when they’ve fallen behind on their payments. As a young paperboy in my small town, the most difficult part of my job was convincing a consumer to pay for next month’s paper delivery. I endured customers who fell behind on their newspaper bills. It was my job to knock on their respective doors and have the debt paid up. More often than not, the consumers paid up. It was hard for them to turn me away. The debtor cannot toss a personal visitor in the garbage like they can a letter in the mailbox. The debtor cannot fully ignore a personal visitor as they can ignore a ringing telephone. However, times have changed.

Consumers are protected from ‘In-Person Debt Collection’ because it causes them substantial harm. In conjunction with the announcement of a $10.5 million agreement with Texas-based, EZCORP, a small-dollar lender that visited borrowers’ homes and places of employment, the Consumer Financial Protection Bureau (CFPB) announced EZCORP ran afoul of federal law by disclosing consumers’ debts to third parties when they visited their debtors’ places of employment. They were also cited for causing adverse employment consequences and for employing other illegal debt collection practices.

This enforcement action by the CFPB triggered a Compliance Bulletin from the Bureau about the risks of in-person collection of consumer debt. Intended to provide guidance to creditors, debt buyers and third-party collectors, Compliance Bulletin 2015-07 sets forth collection activities prohibited by federal laws. This bulletin is important for all creditors to understand. The bulletin cautions that certain in-person collection visits may cause or be likely to cause substantial consumer injury.

The bulletin advises first or third party debt collectors. The CFPB wrote, “…run a heightened risk of committing unfair acts or practices in violation of the Dodd-Frank Act when they conduct in-person debt collection visits, including to consumer’s workplace or home.” Pursuant to the statute, an act or practice is unfair “when it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or competition.”
Depending upon the circumstances, in-person collections can easily meet this definition, the CFPB claims. Arriving in person at a consumer’s home or place of employment may result in coworkers, supervisors, customers, roommates, landlords or neighbors learning that the consumer has a debt.

“When such information is revealed to such third parties, it could harm the consumer’s reputation and, with respect to in-person collection at a consumer’s workplace, result in negative employment consequences,” the CFPB wrote. Even if such information is not revealed to third parties, injury could still occur, the agency added, if “a collector goes to a consumer’s place of employment when the consumer’s employer prohibits the consumer from having personal visitors there, which could result in negative employment consequences.” If the CFPB determines that a company has engaged in acts or practices that violate federal law, it will take appropriate supervisory or enforcement actions to address the violations and seek all appropriate corrective measures.

The bulletin’s clear message is that the CFPB does not like creditors, debt buyers, or third-party debt collectors to engage in the practice of in-person collection activities and that companies behaving this way do so at their extreme peril.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.

The Great Law of Unintended Consequences: No Good Deed Goes Unpunished

I have a very good friend of mine, generous and kind to a fault.  The kind of person who is the first to call to offer help when it is needed, and who continues to keep up efforts to assist even when help is no longer necessary. In short, a great person and friend. Yet, even a friend like this, being human after all, sometimes can lapse into cynicism. I guess who doesn’t.  Sometimes when a good deed goes awry, he will mutter a line that goes something like: “Well, I guess no good deed goes unpunished.”

I don’t hear that very often, but I do think it is a nod to that great law of unintended consequences. Sometimes, even our best efforts to do the right thing, or to do something that we think can have enormous potential benefits, are sidetracked by consequences which were unforeseen or conveniently overlooked at the time. 

An example of this, I think, is the Affordable Care Act (ACA).  All the debate aside, it is now law and a fact we all have to live with. Perhaps its scope and benefits will be further refined in the future, but for now it seems as though much is simply uncharted territory.  The law of unintended consequences is in full force and effect.

A case in point is in Minnesota where hospitals are reporting increasing bad debts which are the result of the part of the ACA requiring all of us to have health insurance.  Consumers are now being caught off guard by the increased cost of deductibles and co-insurance and simply were not prepared to handle this.  In many cases, these were people who before the ACA received so-called uncompensated charity care.

Writing in the Minneapolis StarTribune, reporter Jeremy Olson documents some of these unintended consequences in an article entitled “Minnesota hospitals report more bad debts, community benefits.  And uncompensated care expenses are still going up.”

Although improved enrollment numbers have been touted as proof of the increasing benefit of the ACA, Olson reports: “An increase in Minnesotans with health insurance hasn’t decreased the uncompensated care provided by the state’s hospitals, but it has caused a shift from outright charity care to bad debt from insured patients who couldn’t afford their medical bills.”

Minnesota’s uncompensated care increased from 2013 to 2014 from $573 million to $589 million even though outright ‘charity’ care dropped by 26%.  This increase comes as a result of bad debt accumulated from patients who formerly received charity care written off by the healthcare provider.

Olson quotes Lawrence Massa, president and chief executive of the Minnesota Hospital Association (MHA): “As we change the dynamic of who pays for health care, it’s taken a while for regular Minnesotans to build a surplus into their budgets to take care of those kinds of things.”

Further, Olson points out: “That surge in patients with bad debt added to a 4.6 percent increase in what the hospital association reports as its “community benefit” — the total amount of unreimbursed support they provide to the state.”

Quoting again: “Massa said he is concerned about the rise in bad debt. Writing off the cost of a needy patient as upfront charity is more efficient and less stressful than trying to collect from someone who’s broke and can’t pay insurance deductibles.”

Although many of us saw the cost of increasing deductibles and co-insurance as a way to keep a lid on premium costs, for many it has become an onerous financial hardship. Medical providers now have to do their utmost to spend more time on collection activities which will take more staff time and resources—often resulting in no greater ability to collect the debt than if the cost was written off as ‘charity care’ in the first place. 

Unintended consequences indeed.

A.Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.

Money Can’t Buy You Love, or Can It?

Love is a fairly complicated affair all by itself, but what happens when you add money to the equation? Musical artists around the world have been voicing their opinions on the subject for years. Do you remember “Forever in Blue Jeans” by Neil Diamond? Money talks but it don’t sing and dance and it don’t walk.  And long as I can have you here with me, I’d much rather be forever in blue jeans.  It seems to me that Neil thinks these two things are mutually exclusive—and he’s choosing love.

What do you think?  Are they mutually exclusive or is there a correlation between love and money?  NerdWallet wanted to find out the answer to this age-old question, so utilizing Harris Poll they surveyed over 2000 adult (18 and older) Americans regarding the role personal finances plays in their relationships. 

Interestingly, the results of their survey showed that millennial (18-34) men are the most generous when it comes to spending money on their significant others. And accordingly, they plan to spend more than any other age group on Valentine’s Day activities. Is this an attempt to buy love? Maybe, maybe not.  However, I have to say, I was surprised to read that 54% of millennial men (compared to 35% of men overall) considered the financial wellbeing of a potential partner to be more important than attractiveness. 

As you may have guessed, millennial men are not the only ones looking at a potential partner’s finances.  60 percent of women (compared to 43% of men) said a partner’s financial situation is important to them and 44 percent of women surveyed said it was more important than physical attractiveness.  And a whopping 48%—almost half—of those surveyed said they wouldn’t date someone with bad credit. 

My take-away from this survey is that both men and women find money to be sexy. And for many, there is a direct correlation between love and money.

The Beatles voiced a very different opinion on the subject when they wrote the song, “Can’t buy me love.” I think we can all agree, the Beatles had lots of experience with both love and money! If only we all had that kind of experience, right? Of course, their vast experience also inspired other songs like “Taxman.”

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.