However, a critical decision that needs to be considered when choosing which third party profit recovery company to hire is its licensing and where its offices are located!
The first key criteria that must be used in order to make the decision is whether the third party is licensed (not necessarily located) in the state where the debtor resides. Federal law states that a collection, debt recovery, or profit recovery agency or company can not collect out of state by mail or phone in a state unless they are licensed in that state. So the simplest way to avoid having an issue where your third party can not collect from your debtor because they are not licensed in the state the debtor resides in or, worse yet, where your third party breaks the law is to insure they are licensed in all states. This is very important to minimize your risk as a creditor since the hirer of the third party is liable for illegal collection practices by unlicensed agencies and is subject to a $10,000 fine or up to 5 years imprisonment per section 897(c) of the federal FDCPA (Fair Debt and Collections Practice Act).
The second key criteria that must be used in order to make the decision is whether the third party physically has an office located in restricted/closed or partially closed states if the debtor resides there. At the time of the writing of this article, 18 states were closed and 8 were partially closed. Each state law is unique but the closed and partially closed states basically require that a collection, debt recovery, or profit recovery agency or company can not collect in their state by mail or phone unless they are located (with an office but not headquartered) in that state. So the simplest way to avoid having an issue where your third party can not collect from your debtor because they do not have an office located in that closed or partially closed state that the debtor resides in or, worse yet, where your third party breaks the law is to insure they are located in all closed and partially closed states. Again this is very important to minimize your risk as a creditor since the hirer of the third party based upon the state may be liable for illegal collection practices by non-local agencies and may be subject to fines and/or imprisonment.
Make sure you the creditor do not do time or pay the fine for internal unlawful practices or an unlawful third party!
To inquire about how you can minimize your risk by using a profit recovery company which is licensed in every state and which has offices in all states where it is required, while at the same time benefiting from the flat @$10 fee service that has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at
818-710-0244
Series: "Recover Your Business Profits"
Article: #3 "Make Sure Your Collection Agency Follows Federal and State Laws or You Could do Time and be Fined"
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