Securing an unpaid debt is challenging enough. The last thing any company wants to do is undermine its efforts by forgetting to cover all the necessary legal bases.
A simple one to avoid? The so-called “mini-Miranda” warning required under the federal Fair Debt Collection Practices Act (FDCPA) that apply to credit & collection services and debt collection agencies.
The mini-Miranda warning that should be included on all written communications with a debtor is: “This is an attempt to collect a debt and any information will be used for that purpose.”
Failure to include the warning in all communications sent by representatives of your company, can result in a debtor winning an FDCPA lawsuit.
Pamela Fagan, president of Audit Business Services, advises her clients to understand that communications can include any and all:
- telephone calls
- snail mail notices
- text messages
- purchase agreements, and
That goes for third-party debt collection agencies and outside attorneys hired to attempt to collect an unpaid invoice.
Don’t make the same $100K mistake!
Fagan shared the story of a client she represented in a Premier Learning webinar, Today’s Strategies for Better, More Effective Debt Collections:
“My client lost a suit against a client owed more than $100,000 because they didn’t issue the mini-Miranda warning. … [The exact words] weren’t on any of their communications.”
The case became a “he said, she said” dispute even though the client didn’t threaten the debtor or engage in “shady” or “aggressive” practices explicitly spelled out in the FDCPA.
“The courts ruled there was a pattern of not communicating [mini-Miranda] in its written documents. Therefore it was fair to assume that no warning were given in any verbal [or other] communications.”
Bottom line: The courts won’t give companies owed a debt the benefit of the doubt if basic parameters of the law aren’t followed.
Keep in mind the FDCPA isn’t the only law that may come into play in a debt collection effort. Other laws to be mindful of include the Truth in Lending Act, the Fair Credit Reporting Act and the Uniform Commercial Code.
We’ll keep you up to date on legal loopholes that can undermine a debt collection effort.