Ever been behind on a debt or know someone who has? When people get behind or in trouble, the harassing phone calls start.
“When are you going to pay?”
“We’re calling the police on you.”
“What kind of person are you that you don’t pay your debts?”
Or maybe they adopt the tactics of the greatest debt collectors of all… the mafia. Then again, maybe it’s the IRS? Nice.
Most debtors are about as excited to talk to debt collectors as they to sit in the chair for a root canal. According to Kiplinger’s, the debt collection industry gets the most complaints of any industry regulated by the U.S. Federal Trade Commission – more than 300,000 complaints in the past five years.
We at Real Estate Mogul are all for paying your debts – especially if they are owed to us. (Ha!) But we all know people get into trouble with medical bills, job losses, deaths in the family, divorces, etc. After all, that’s what turns people into motivated sellers of their houses!
Many real estate investors also know how difficult it is to collect on debts. Try collecting from a tenant who has been evicted. Even if you win a judgment against the tenant, your chances of collecting on your own are pretty slim.
Using one of these debt collection services has very mixed results. You may collect some of your money, but the service will take up to half of it as compensation. Or they may tick your tenant off so much that the tenant makes it their mission in life not to pay you.
Or maybe the tenant decides to sue you. There are all kinds of rules imposed on debt collectors such as the ‘Fair Debt Collection Practices Act,’ which has penalties as great as triple the amount outstanding going to the debtor from the creditor.
In other words, you would have to pay the guy who owes you money 3x what he owes you!
Not fair? We agree. But them’s the rules. Get used to it. Or…
Let Tech Do the Talking
We found a company who has had a lot of success collecting debts using technology. Most of their algorithms and methods are proprietary, but it works. One of the founders of the company was an Israeli military Intelligence officer. When your job is to collect life and death information from people, collecting debts becomes a walk in the park.
Another founder is a former Google senior software engineer and the third was a Senior Director at Paypal. The combination of these three backgrounds makes TrueAccord far more advanced than other debt collection companies.
TrueAccord uses psychology to work with debtors. Their mission is to collect the debt without ruining the relationship. In these days of instant information, people can hop on the internet and ruin a company’s reputation very quickly.
So instead of ensuring debtors will never do business with you again, or worse, why not try to figure out what would get them to pay without going all Don Corleone on them?
Traditional debt collectors try to retrieve as much as they can, as fast as they can. TrueAccord takes a more long-term, relationship-based approach. They also focus on debts that other debt collection agencies pass up because:
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The account may not be big enough to be worth their time.
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The debtor is not very receptive to the harassment (imagine that) or may be difficult to track down.
TrueAccord works with your debtor by researching them online. They can learn about the person through social media, sites they might frequent, and interviews with the person or company-owed money.
When you sign up with TrueAccord, their website will ask you to upload a .csv file of what exactly is owed. Then a person at TrueAccord will contact you to learn more about the situation and the debtor.
Their technology will then build a profile about the debtor that will have a lot more chance of success than a one-size-fits-all approach.
After the profile has been built, TrueAccord’s systems will set up an account on their website for the debtor to log in and monitor their payments and their progress. The website will also set up automatic reminder emails, phone calls and other forms of communication to remind the debtor of his responsibility to pay.
TrueAccord also has two lawyers on their staff, and they work with regulators and legislators to both help the lenders and ensure compliance with the law.
Most people believe in paying off their debts. When a company like TrueAccord works with them, they will feel better about paying the debt.
Obviously TrueAccord is not going to do this for free. You can see their standard plans here. Nearly all real estate investors will want to take the basic option, which means nothing up front, and is designed for debts less than $1 million.
When they do collect on a debt, True Accord will keep a percentage of what they collect. The exact amount will vary depending on the size of the debt and the nature of the account. But the percentages are generally less than a traditional debt collection service.
If it still seems like a lot when you call them, remember you will still make a lot more than if you don’t collect on the debt at all.
Do I Need a Debt Collection Service?
If someone owes you money and you are having trouble collecting, you may want to consider TrueAccord. Besides collecting from rental tenants as we mentioned above, investors who work with lease options and discount notes might find these guys handy.
Say you buy a discount note for .20 cents on the dollar and TrueAccord charges 20% for their services. That kind of note will probably be very difficult to collect. But if TrueAccord succeeds in recovering payment, you will still collect 80% of the note, or a 60% profit after subtracting the 20% you paid for the note, all with no work on your part.
The folks at TrueAccord are constantly working to improve their technology. Along with these improvements should also come higher success at debt collection.
Collect Your Thoughts and Share
(Did ya like my pun there? I did!) Have you used TrueAccord? Thinking about it? Talk to us below.
Avoid letting people get behind – the best way to deal with delinquencies is not to let them happen. Take action immediately when people start owing you money.
Maintain relationships – you never know where your next deal will come from. Be fair but firm with people when they owe you. They will (hopefully) appreciate your professional attitude.
Stay legal – debt collectors are HIGHLY regulated. Know the laws or hire someone who does. The penalties are SEVERE.