Steve Harms

Tuesday, January 31, 2012

Collecting Accounts Beyond the Statute of Limitations

A cautionary note:  I suggest you Google or otherwise read about the $2.5 million dollar fine imposed on a Michigan debt buyer for failing to tell consumers that on debt past the statute of limitations, the debt is revived by a payment.

Clearly, payment on debts beyond the statute of limitations can be demanded as the money is still due.  However, these debts can't be sued on, because each state imposes a statute of limitations, which is simply a "drop dead date" for bringing a collection suit in the courts.

Apparently, and the upshot as of this minute is a bit unclear, collectors CAN demand payment on old debt as long as the consumer paying it is told the debt is beyond the statute of limitations in that state, that a payment will revive that statute, and suit can be brought if a payment is made.  Also, some of the articles today on the Internet suggest the debt collector may be limited in reporting the debt to credit reporting agencies.

If you collect past due accounts, which are beyond the statute of limitations, check this out and comply with any new/existing requirements to avoid being charged by the Federal Trade Commission.

By the way, the Michigan debt buyer settled without any admissions of the FTC claims according to articles on the topic....the point of this blog is NOT to toss any stones at this business (which is why I didn't even name the company mentioned in the article), but rather to educate readers of the potential issue the FTC may raise with collections on older accounts, typically consumer accounts.

Monday, January 30, 2012

Collections: MERS update

On Tuesday, May 3rd of 2011 I posted a blog discussion on MERS, the mortgagee created to quickly file mortgages, but not the holder of the note (the debt).  The discussion was to the effect that the Court of Appeals held the mortgage foreclosures by advertisement had to stop and that there were serious issues to be dealt with because the note holder and mortgage holder were different entities.

Well, getting right to the bottom line, and not getting caught up in the many technicalities on this whole issue, the Michigan Supreme Court has now ruled that the Court of Appeals was wrong.  So, we are back to business as usual here in Michigan in terms of foreclosures, and there apparently is no legal problem with the MERS filing system and the mortgage foreclosures....I suppose good news for the banks and perhaps bad news for the home owners.

If you are a legal beagle and want to read more about the case, check out or Google Saurman at 805 NW2nd (that's Northwestern Reporter, 2nd) at page 183.

Tuesday, January 24, 2012

Collecting Money: Avoiding Stall Tactics

Debtors (people or companies which owe money to creditors) love to stall payment, anyway they can!  The more they stall, the longer they can hold on to their money, or, the longer they can use YOUR money to pay for other things.

One strategy to avoid the stall tactic is to try to find out what portion of the debt is allegedly disputed (the stall tactic).  Then, get the debtor to pay the undisputed portion of the claim. Your logic to the debtor is simple: “show your good faith to our client by paying the undisputed portion of this account, that way our client will take your claims/objections more seriously and we can actually resolve them”.

Keep in mind that the debtor wants to make the matter as complicated as possible. This is an excellent stall tactic used to confuse many debt collectors. If the debtor can convince the collector that this is a complicated, fuzzy, hugely disputed matter, the creditor is more likely to let the debtor get away with a stall. The collector might even let the debtor go an additional 30 or 45 days after the last communication, not wanting to deal with these stalling tactics!

Again, make the file as clear as possible by defining the undisputed portion, and then focusing in on the actual issues as to the disputed portion of the claim including information such as the invoice numbers, or the description of the goods which are disputed.

Once you know exactly what is in dispute, obtain the necessary documents to "prove" your case (invoices and the like).

Documents will include invoices and delivery receipts but also call notes made by in-house credit people, scraps of paper written in handwriting, e-mails, faxes, etc. Obviously, if you can find a piece of paper where the debtor admitted that they were going to pay all or even a portion of the account, you have struck gold! The best clients for collection attorneys like me are those clients who keep things in writing, particularly when an account is disputed.

A good credit manager, even on a disputed account, would write something to the debtor like “per our conversation today, we agreed to work on invoice #123 for $1,000.00 but you agreed, in the meanwhile, to pay off the remaining balance of $1,500.00 on the other invoices which are not disputed”. Obviously, a document like that is a piece of gold to you and to your attorney if the case actually goes on to be sued. Any written admission of the debt is a very, very substantial piece of evidence in your favor!!

If the case does go on to suit, please note that all documents should be sent onto the attorney particularly “key” documents such as personal guarantees, contracts, credit applications, invoices, delivery receipts and related documents. Yes, even a credit application is extremely important. It can tell you and the attorney where the debtor banks and other very helpful information. Sometimes there is a question that you might not even anticipate such as what the legal composition of the debtor is. The credit application should clear that up.