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Collection procedures outline how an entity collects debts in the event of non-payment, and can protect a business from legal liability. Debtors must receive notices and can negotiate payment plans, but legal action can be taken if they do not respond. It is important to review all terms and conditions, including collection procedure disclosures, before going into debt.
A collection procedure clearly describes the policies and procedures an entity takes to collect debts in the event of non-payment. In some regions, organizations such as universities, tax agencies, and utility companies are required to provide information about their collection procedures to members of the public for informational purposes. These policies also create a system that employees must follow when processing debts and representing the company in negotiations with debtors. They may be published in employee manuals and other internal documents.
Such documents may begin with a discussion of basic terms, such as a net 90 repayment agreement for debtors. Under the terms, people have a set period of time to receive their bills and pay them, dispute them, or negotiate a payment plan. If they don’t respond, the company can start collection proceedings to collect the money. The scope of the collection activity may depend on the nature of the debt; Tax authorities, for example, can seize property and auction it off to cover unpaid taxes.
Under the collection procedure, debtors must receive notices that provide information about the debt, applicable interest and fees, and where to direct payment. If they respond, the company can enter the next phase, collect the debt in full, or create a payment plan. When debtors do not respond to payment requests, the company can take legal action to collect the funds. You can also conduct an investigation to locate missing debtors and identify assets that might be eligible for seizure, if you are authorized to participate in the seizure activity.
Clearly established collection procedures can protect a business from legal liability. If you treat all debtors equally, you cannot be accused of discriminatory practices. Having established policies allows employees to follow them carefully and neutrally with all debtors, rather than using their own best judgment. Documentation can also be helpful in the event of a dispute, as the company can show that it obeyed the law and followed internal procedures when handling a matter.
Those with questions about the collection procedure may request to see the documentation and may request an explanation of any component they have difficulty understanding. Before going into debt, it may be wise to review all terms and conditions, including collection procedure disclosures. This can provide important information about what people should do when they fear they won’t be able to pay.
Smart Assets.
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