Monthly Archives: November 2013

When is it Time to Collect on Past Due Accounts?

It’s no wonder that businesses worry about past due accounts – nearly 70 percent of them that High Debt 1go beyond the 90-day mark are never collected. Knowing when to step up collection efforts can reduce the amount of receivables lingering in the overdue file.

Unfortunately, most small business owners struggle not only with when to go after overdue accounts, but how to go after them. Past due accounts create a fair amount of confusion in business owners because while they need that income to grow their business, they don’t want to come off as demanding in their efforts to collect. Many fear that if they push too hard, they’ll develop a bad reputation and lose business.

Business owners who have been there before and have found a solution advise others to develop an internal policy and procedures that address the subject of past due accounts. The procedure will include a list of items that must be carried out, such as when the first letter should be sent to the client advising them that their account is past due. Most small businesses will send out that letter within 30 to 45 days after the bill is past due. One effective measure involves following up on the letter with a cordial phone call.

At the 60-day point, it’s time send another letter (some will send a second letter at the 45-day point). This letter will request that payment be made in full or that the company is willing to meet with the client to determine why they can’t pay. Offering a payment plan is also an option at this point.

Should these measures fail to produce a payment out of the client, one final letter should be sent that advises them that failure to respond will result in your company exploring “any and all options” to collect on the debt. This could include litigation. As a general rule, most companies will take a client’s account to a collection agency if the total is $500 or less. Attorneys handle larger amounts as they can take judicial measures like wage garnishment to collect on the account.

Sending the account to a collection agency is a good course of action because it usually results in more positive cash flow. Collection agencies are professionals at recovering debt in an ethical manner that will not hurt the public image of the company they represent. The industry is highly regulated, which means falling out of line with government regulations results in harsh fines.

Most companies have a difficult time tracking down debts that are 90-plus days old. They don’t have the expertise to find the debtor, nor do they have the experience required to successfully arrange payment options if they actually do get lucky and find the debtor.

Omega-RMS, llc., is a company with four decades of experience in collections and account receivables management. The professionals at Omega have a variety of tools at their disposal and the expertise to use them to a positive end for their clients.

Business Owners Are Positive About Economic Outlook: Payment Recovery is a Step in the Right Direction

Credit Score 1A recent study by TransUnion asked participants to rate their understanding of credit scoring models, which are used any time consumers buy a home, car or apply for credit, either through a big bank or through retail stores. Nearly 70 percent indicated in the study that they have
no understanding or little understanding of the credit scoring process.

The credit score is often what stands between the consumer and the goods they want to purchase. For lenders, the score indicates the probability of that consumer paying back the
loan. Credit reporting companies use different scoring models, which is why one person’s score can have a range of numbers and can cause some confusion.

Most scoring models look at payment history, which shows late payments as well as on-time payments, the latter of which can improve credit scores. High balances can be a detriment of lower a credit score. A goal to keep in mind on this front is to stay below 35 percent of the total credit available. A lengthy credit history shows less risk, especially if the history is clean. Every time a creditor checks on the credit score of a person or business, it causes a
slight drop in the score, which is why applying for credit as little as possible is a good idea. Most creditors are looking for a client that has a variety of credit types and loans on their record.

Despite the apparent lack of visibility into the credit score process, fewer Americans are taking out large debt on traditional credit cards and going with more retail-based credit cards. Consumers and businesses that work hard to pay down their accounts are helping to reassure business owners that the economy is turning around. But payment recovery efforts are still needed to increase cash flow.

Payment recovery solutions from professional debt collection agencies offer what a credit-scoring agency can’t, which is the ability to collect on unpaid debt. Regardless of the credit score, some accounts don’t pay on time. The longer the account goes unpaid, the more difficult it is to recoup those funds. Companies can send out letters and make calls on their own behalf, but the success rate is not promising.

Payment recovery solutions might include accounts receivables management, which some agencies will offer. This is a process where receivables are purchased for a fee, which means the company gets paid immediately and never has to worry about an account going past due.

The economy can’t recover when consumers don’t spend or when companies offering credit don’t get paid, which is why debt recovery agencies like Omega-RMS, llc., are a vital resource in giving business owners a more positive outlook on the conomy. Omega has the expertise and the equipment to reclaim lost revenue, giving business owners a leg up on their growth potential.

Changes in Loan Servicing Debt For Student Loans Over Time

The process of collecting on student loans has evolved over time. Now that student loan debt Student Loan 1has surpassed $1 trillion, which is more than what Americans owe on credit cards, maybe it’s time to recap the regulatory changes that have taken place and the options students have today in repaying their debt.

Almost 20 million Americans attend an institution of higher education every year. About 60 percent of them borrow money to get through school. Most of the money they borrow is in federal student loans, about $864 billion. Another $150 billion is in private student loans. In 2012, the average debt load was $24,301 per student, but that number is growing.

With 10 percent of borrowers owing $54,000, there are a large number of people struggling to repay their college debt, which is delaying life choices that the generations before them were able to make right out of college. Buying a house, getting married and starting a family have all been put on the back burner while Americans with heavy student debt loads focus on repayment.

But not everyone can make those monthly installments. At least 14 percent of borrowers have at least one past due payment hanging over their heads at any given time. Approximately $85 billion is past due. The default rate rose to 9.1 percent in 2010, according to the US. Department of Higher Education.

Back in the 1970s, collecting on student loans was not a complex task. It was actually similar to collecting on pretty much any other type of debt. The debt collector would make repeated attempts to contact the debtor, and once contact was made, a payment arrangement was made. This was the process until 1993 when the omnibus Budget Reconciliation Act was passed. The act introduced wage garnishment to collecting defaulted student loans. It also wiped out the statute of limitations on old debt, which means borrowers who failed to pay back their loans from the early 1960s were once again fair game for collections.

Loan rehabilitation was offered in the late 1990s, which allowed defaulted accounts to get out of default after 12 monthly payments were made on time. After completing this payment schedule, the student’s credit score reflected no default history. However, Congress amended the law in 2008 to allow students to rehabilitate a loan one time only, as many students would get out of default and then fall right back into it.

Educational institutions offering loan servicing and third party financing also need protection from defaulting students, which is where professional debt collection services come into play. Students unable to obtain federal student loans often seek out another financing resource, which generally involves short-term loans. When those accounts come due but no money changes hands, debt collection agencies have the means to work out repayment plans.

Omega-RMS, llc., has experience working with educational institutions, offering innovative solutions, including loan servicing, to keep them from falling behind on accounts receivables, and students from falling into default.

Bad Debt Collection on the Rise as High Medical Expenses Lead to Credit Card Debt

A national survey carried out in 2012 shows that people need more options in paying down their Medical Bills 2medical debt.

The survey proves what many already know – medical debt is forcing too many Americans to pay for necessities with credit cards. While the average credit card debt has declined, low- and moderate-income households are putting their medical debt on credit cards. The average amount, according to Demos’ National Survey on Credit Card Debt, was $1,678.

Americans had an average credit card debt of $9,887 in 2008, prior to the recession. It has dropped to $7,145. The problem is that about 40 percent of households are using those cards for basic expenses, something any investment advisor will warn against.

A representative from Demos, which is a non-partisan research organization, said the public’s reliance on credit shows that citizens need policies that keep working citizens from making enough in wages to pay for their medical expenses and everyday necessitates without
using credit cards.

Around 60 percent of citizens site medical expenses, which they paid out of pocket, for their mounting credit card debt. In the last three years, almost 40 percent of households experienced tighter credit, like having their cards canceled or limits reduced. They are also having a more difficult time getting approved for credit. About half of these households who have had their access to credit limited said they would be using it today if they could.

The minority groups are getting hit particularly hard. Nearly 45 percent of African Americans and 55 percent of Latinos describe their credit as excellent or good. The overall percentage describing their credit situation as excellent or good is 62 percent. Around 55 percent of people with poor credit say that unpaid medical bills have killed their credit, leading to an influx of bad debt collection calls.

Congress has considered relief for the damage medical bills caused to consumers’ credit. Driving the relief efforts is the statistic that more than 70 million Americans have had medical debt problems due to medical billing problems. A coalition of consumer groups recently found that as many as one in 10 medical claims had errors. Furthermore, about 25 percent of Americans have overdue medical bills.

There is a measure in the Fair Credit Reporting Act that bars credit agencies from taking medical debt into account when considering an application for credit. However, creditworthy consumers are often denied credit or pay higher rates because of the debt related to medical bills.

Regardless of the errors, there are a very high percentage of businesses losing money to unpaid accounts that were billed correctly. These businesses are counting on third-party debt
collection agencies
to solve the problem. Bad debt collection professionals are assisting in reducing that gap between delinquent consumers and those who pay on time.

Omega-RMS, llc., approaches debtors with professionalism and respect and works out plans for repayment. This not only pleases the clients, but assists the consumer in digging their way out of debt.

Forward Thinking Retailers See Increase in Consumer Credit Card Debt

Attitudes toward finances changed as consumers emerged from the recession. The use of credit cards fell while the recession was in its worst stages, but use has climbed recently. Consumers are actually using retail cards more than big bankcards. Retailers are enjoying an influx of revenue generated by the credit extended to customers, but they’re also exposing themselves to risks that could require debt collection agencies to assist.

Nineteen of the top 25 metropolitan areas in the U.S. are seeing bankcard balances stay flat or decline while retail credit card balances go up. Retail cards are at nearly 90 percent of their pre-recession balances while bankcards are just under 60 percent. Consumers are not as willing to take on debt tied to banks. However, with promotions tied to retail cards, like when a consumer receives a big discount on the items they purchase on the day they apply for a card, consumers are finding more incentive to go with credit offered by their favorite retailers.

It takes some forward thinking for businesses to climb out of the hole they found themselves in during the recession. Convincing consumers to part with their money is a tough sell as the recession-weary public is just now starting to gain more income. Many companies saw a chance to create cash flow by offering credit for their products and services. Some chose a third-party financing group to assist in these efforts. They’ve also taken on third-party debt collection agencies to help them recover what they’re losing to clients that don’t honor their account agreements.

Many of the retail outlets are offering credit to consumers that can’t secure a card through more traditional services, such as banks. For the consumers hit hardest in the recession, an opportunity to make purchases on credit is a major incentive, which is another reason economists believe credit cards from retailers are on the rise compared to those from banks.

Equifax Personal Solutions President Trey Loughran said recently that the rise in retail credit card debt is an indication that consumer confidence is on the rise. He also mentioned that carrying over credit card balances could lead to a situation where consumers overspend. Missing monthly payments follows overspending, which means companies offering credit will begin to see a lot of money tied up in receivables. In the business-to-business realm, the average time it takes to pay off an account is already at 54 days, so businesses are seeing cash flow problems as a higher percentage of their income is tied up in receivables that are slow to arrive.

Omega-RMS, llc., is one of the leading providers of strategies that assist companies in regaining their receivables. Offering accounts receivable management to forward thinking companies is helping them with their cash flow and to grow. The contingent collection services is also an option for companies that don’t want to sell their receivables but need assistance in reclaiming money owed to them by debtors who are behind on payment. Omega has the professional staff to handle the problems these companies face in getting back what is theirs.

CFPB Looks to Consumers on Updating Loan Recovery Regulation

Collections 3The Consumer Financial Protection Bureau (CFPB), which is the governing body overseeing debt collection agencies in the U.S., issued an advance notice of proposed rule changes to the Fair Debt Practices Act this week. It’s now looking for feedback for proposed rules it is considering on the debt collection industry.

The public will have 90 days to comment on the new regulations, which are focused on updating legal framework within the act. The bureau is looking for comments from consumers, debt collectors, debt buyers and consumer advocates regarding what regulations that control the industry currently work and what could use some updating.

Specifically, the bureau is interested in three areas – the communication tactics used by loan recovery groups and debt collectors, the level of understanding consumers have of their rights and the accuracy of the information that collectors have on debtors.

The CFPB hasn’t been specific on exactly how it will govern rulemaking, an official recently said that they will likely focus on first party debt collection and creditors. Creditors that use in-house collections are not held to the Fair Debt Collection Practices Act. However, the CFPB has been fairly vocal in its opinion that creditors should be held to the same standards as debt collection agencies.

However, creditors and third-party debt collection companies are held to the regulations in the 2010 Consumer Financial Protection Act. The CFPB issued a news release in July reminding these entities that they are to be held accountable for using unethical and illegal tactics, such as using abusive language or deception in their collection efforts.

The CFPB recently released approximately 5,000 debt collection complaints filed since July. In its semi-annual report to Congress, the bureau said that through its enforcement, they have refunded more than $750 million for consumers who were in contact with debt collection agencies that used unfair practices in their efforts. Furthermore, the bureau has put more than $82 million in a Civil Penalty Fund, which is used to offer assistance to educate and compensate consumers who have been violated.

At the heart of the mission of the CFPB is a dedication to consumers, that they be treated fairly, whether it’s by debt collection agencies or in credit reporting. Reputable loan recovery and debt collection agencies applaud the efforts of the CFPB in weeding out the organizations that don’t follow the rules yet are often rewarded for their unethical mistreatment of consumers. The CFPB has a hefty task at hand as thousands of complaints roll in to their offices.

Companies needing the services of professional debt collection agencies reap the benefits of doing their research before choosing an agency. When they choose wisely, they get a firm that represents them well and helps to boost their public image rather than have multiple complaints filed on them. Omega-RMS, llc., is a loan recovery and debt collection company that has four decades of experience in treating consumers with respect while recovering money for their clients.

Court Case Emphasizes How Important it is to Know Your Debt Collection Agency is FDCPA Compliant

Collections 1Debt collection agencies are increasingly coming under fire with more regulations aimed at them. A recent court ruling sent shockwaves through the industry and outlines how the Fair Debt Collection Practices Act, or FDCPA, must be followed.

The Third Circuit Court of Appeals overturned a lower court ruling in March where the language of a debt collection letter sent to a debtor was at question. The debtor had accrued medical-related debt and was sent a letter that “the least sophisticated consumers” would find confusing.

The letter was received in 2010 from a recovery group specializing in collecting debt for the medical industry. The debtor was notified in the letter that if he felt he didn’t owe the amount listed, he could call an 800 number. Furthermore, the letter said it was an attempt to collect a debt and that information obtained would be used for that purpose. However, the back of the letter said that they would only take disputes through writing.

The circuit court said it could see how the language regarding the 800 number could be nothing more than an invitation to begin a dialogue with the agency. However, they overturned the lower court’s verdict saying recipients of such a letter can’t be expected to have the expertise with legal language to understand it and that it is misleading.

Being FDCPA compliant requires hospitals and the collection agencies it partners with to go over their communications with debtors with extreme caution. The act that protects consumers has been on the books since 1977, and there are still violations being carried out by well-intentioned collection agencies with a reasonable understanding of the act. However, reasonable understanding doesn’t pass when it comes to being FDCPA compliant.

When a debt collector violates the FDCPA, they can be sued for emotional distress, physical distress, attorney’s fees and lost wages – and this is on top of the fine for violating a section or sections of the FDCPA. There are many ways a collection agency can violate the law. For instance, a collector cannot contact a debtor at an inconvenient time (8am-9pm is the safe window), if the debtor has an attorney, if the debtor requests no further contact, or at the debtor’s workplace.

There are provisions in the law that might seem obvious to the reputable collection agency, but are disregarded by those with unethical practices. These provisions include harassment and abuse of the debtor. Agencies can never threaten violence, arrest, use obscene language or make repeated calls.

Companies are urged to select their debt collection agency carefully to avoid sullying their public image. Doing research on the agencies before signing up with them is a must. Checking their record to make sure they’ve stayed FDCPA compliant will help give assurance that the agency is operating ethically and will represent the company well.

Omega RMS, llc., has enjoyed years of servicing companies with debt collection solutions for years. The company has a team of professionals who know the FDCPA and state laws exceedingly well and remain compliant with their guidelines.

Products And Services From Omega-RMS

It pays to go with professionals, especially in the highly regulated industry of debt collection. Omega RMS, llc., has more than 40 years of practice in successfully servicing companies with debt solutions, and it has a team of highly trained individuals providing quality client care day in and day out.

Omega-RMS has a number of services and solutions from which to choose, and it’s important to note that the company is a member of the ACA International, the Association of Credit and Collections Professionals. The ACA is a comprehensive and knowledge-based resource for the collections industry. The ACA was founded in 1939 and has 5,000 members across the globe.

Members of the ACA have established their standing as an ethical operation providing value to the credit and collections industry. Members closely follow policies and stay compliant with federal and state laws regarding the Fair Debt Collection Practices Act.

Omega-RMS professionals bring innovation to their clients and offer them a level of respect and quality to the debtor that goes beyond what is required in the rules and regulations that regulate the industry. In the end, it’s all about the way in which Omega represents the client, helping not only to retrieve receivables that might otherwise be written off, but also to boost the public profile of the clients they represent.

Omega does this in a variety of ways. First, Omega professionals know that to successfully manage the portfolios of the client, they must have innovative strategies and the right tools to execute them. To this end, Omega utilizes client reporting gateways, performance analytics, tools and resources. The gateways offer complete transparency to the client, which means they can view status codes and servicer remarks in their efforts to track progress.

The transparency offered by Omega extends to the performance analytics, which gives a data-driven, behind the scenes look at what’s going on with client accounts. Armed with data, clients can make fact-based decisions regarding their accounts. Furthermore, Omega is armed with state-of-the-art technology that gives them the power to make contact with old debt where in-house debt collection attempts often fail.

The services provided by Omega include accounts receivables management, which is the heart of the mission at Omega. Companies that want to see an immediate increase in cash flow sell their receivables to Omega for a fair price and get a quick infusion of the cash they need to effect growth.

Omega’s early intercept recovery services are a proactive and forward-thinking approach to debt collection. Knowing that any business extending credit to clients will result in late payment, Omega has developed a customizable pre-collection system that protects clients from ever reaching a charge-off designation.

Finally, Omega’s contingent collection services are designed around staff that are trained beyond what’s expected of most debt collection agents. Licensed and bonded in every state, Omega can reach out to any debtor in any state with the training to ethically and professionally communicate options for repaying debt.

How Did the FDCPA Come to Be?

In 1977 the Fair Debt Collections Practices Act, or FDCPA, ran to the rescue of consumers who were being badgered and abused by disreputable collection agencies for years.

Prior to Congress passing the FDCPA, consumers in debt felt they had no rights and were often reminded of as much by collection agencies that used a variety of tactics, many of them unethical, to get money out of them. The behavior of agencies using these tactics was reigned in by the FDCPA.

The FDCPA also puts protections for honorable debt collectors in place as well. A number of honorable collection agencies were falling under attack from consumers who filed numerous, frivolous lawsuits. Think about the success rate of agencies who did anything they could to get a debtor to pay up; they had lots of success. Reputable agencies not willing to stoop to unethical practices were losing out to the unethical ones.

With the FDCPA in place, the behavior of collection agents is limited to that of ethical and professional behavior. No intimidation, deceit or misrepresentation is allowed. No longer can an agent call a debtor at all hours of the night or at work. This law doesn’t impact the owners of the local hardware store who call clients who owe them money – it applies to third party debt collectors who make regular calls to debtors on behalf of their clients.

While the first-party collection attempts aren’t held to the same standard as the FDCPA, many companies with in-house collection staff will abide by the rules set forth by the FDCPA just to make sure they don’t attract negative attention or lawsuits. Furthermore, there are laws at the state level that differ from the FDCPA, which is something anyone trying to collect debt needs to be mindful of before pursuing debtors.

What exactly can debt collectors do in their attempts to extract payment? First off, they have to be mindful of which time zone the debtor resides because they can only call between the hours of 8 a.m. and 9 p.m. However, not everybody keeps those hours. If a person works the night shift and sleeps during the day, he or she can notify the collection agency and the agency has to keep in mind the convenient times to call.

It’s not just phone calls that can get an agency in trouble – sending mail that indicates that the recipient owes a debt is also against the law. Many consumers who are extended credit will at one point or another fall behind, even it is just a couple of days late on a credit card. This doesn’t mean they can be embarrassed, harassed or deceived into paying the bill. The FDCPA sees to that.

Omega RMS, llc., is a company that never needed the FDCPA in order to know how to treat the people with whom they interact. Omega operates as an extension of the clients they represent, which means debtors are always treated with respect. The goal at Omega is not only to see that their clients get paid, it’s also to enhance the public image of the client.