The Debt Detective: 3 Non-Traditional Tactics for Construction Collections

We don’t have a lot of legal accounts … for now, fortunately, but we have a few tied up in collections. When I was reviewing them recently, I noted that there were things our collection agency might try doing that could increase the odds of collection.

So, I sent their President a letter with some suggestions.

The first one was a way they might find the debtor’s bank to garnish after judgment. One creative thing they might do is to set up a checking account with a very generic name. Then they send a check, a very real check, for like fifty bucks, to the debtor, maybe with a note simply saying ‘refund.’ Send it in a blank envelope.

Then, if the debtor cashes the check, we know the bank info for a non-wage garnishment. Our company would fund it, and if the check isn’t cashed, the collection agency can refund it to us. I suggested he ask his attorney if it would violate any laws. I don’t know why it would, since the debtor chooses whether to cash the check, and it’s a valid debt in a case decided by a judge. I suppose we could do it ourselves, but I couldn’t talk our CFO into it.

The second suggestion I have is one that many collection agencies do, but for some reason, ours doesn’t. Before the FACTA laws changed, I was allowed to put our debt directly onto a guarantor’s personal credit report using a service provided by the company, and then contact the credit reporting agency, TransUnion, directly with any updates.

When the credit reporting laws changed, I lost that valuable resource. This was horrible because I did it hundreds and hundreds of times and collected so much with little effort. It also enabled me to collect balances we had written off.  I kept a file that easily helped me keep everything up to date.

But then it was taken from me, and our collection agency doesn’t use it when they easily and legally could. I sent him an example of one of our open collection cases where the guarantor is giving ridiculous settlement offers, claiming that his secretary signed his name to the guaranty without his authorization, yet she somehow knew his Social Security number, which was included on the guaranty. He has a sterling personal credit report, and I sure would like to un-sterling it. Maybe he’d be more cooperative if he knew we could legally mess up his credit score.

I know collection agencies can still utilize this resource. I see it all the time when I pull personal credit reports. I just can’t do it myself. Why wouldn’t we want to use this awesome tool?

The third suggestion I made was for them to consider hiring the services of a private investigator to physically follow and report on debtors. There might be someone that, if we knew where he or she went every day, we could learn where they work, or what job they are subcontracted to, or what luxury yacht they own. This would be more expensive, but if the debt is high enough, spending five hundred or a thousand bucks for a day or morning might be worth it.

I did this myself a few times. One time, a customer owed us money, we had a judgment, and, believe it or not, the customer continued to buy from us on a COD basis. So, I told our counter salespeople to let me know the next time he was in, but not to let him know they were telling me.

About a week later, one of our guys called me. “Hey, Norm,” he whispered. “He’s here. What do you want me to do?” I said, ‘Nothing, I’ll handle it.”

I think my counter guy figured I’d come in to confront the debtor, but that’s not what I did. I went out to my car and waited for the debtor to leave. When he did, I followed him, followed him some more. Then some more. A few towns later, he pulled up to a construction site, and I knew where he was working and for whom.

I called our collection agency, we filed a non-wage garnishment on the job, and we were paid in full.

Yeah!

This is what a private investigator could have done. I suppose I could hire one myself, but I tried that once, and the ones I found only did things like spying on people who might be cheating in marriage, or who might be scamming an insurance agency with fake medical issues.

I’m sure there are PIs out there who could do this. I just couldn’t find any. If a collection agency hired them, the PI would see a lot more potential business and maybe be more interested.

The President of the collection agency responded and said he would consider my suggestions.  I don’t know how that will come out, but I have the option to jump to an agency that does, so it’s my decision. But I like the agency, and they handle collections fine, so I don’t know if an agency I might go to would handle my files the way I want.

It seems that in today’s economy, I might have to decide something soon. I’m seeing more defaults, which my competitors are also reporting in our monthly meetings, so there could be an upsurge in collection accounts.

For now, it’s in the air.