In many cases, the parties liable for a debt are very clear cut. However, there are a few scenarios that come up where the consumer wants to involve an outside party, claiming they are responsible. Inexperienced collectors will allow the consumers to direct them on a winding path that can delay payment by weeks or months, and ultimately make the consumer feel vindicated of any responsibility if the third party doesn’t pay the account.
Here are two common scenarios that come up repeatedly in consumer collections:
Separation and Divorce
When two liable parties separate, there is often a court order for one party to assume liability. When the file lands in collections, often the one party will want to provide a copy of the order, and instruct the collection agent to pursue the former spouse or partner. However, this is order or joint agreement doesn’t remove liability – if the former spouse doesn’t honour the agreement, that is a breach of terms between the spouses, not the creditor and the liable parties. It needs to be explained to the consumer that a separation agreement or order doesn’t remove liability, and it would be up to the consumer to enforce their personal agreement, not the creditor.
Especially in the case of medical claims, where a consumer claims coverage for medical bills, they may want to remit payment when the insurance proceeds arrive, or ask the collection agency to reach out to the insurance company to resolve the issue. In some cases, this is reasonable, but it’s very important to educate the consumer that an insurer and a consumer have a direct agreement between them, and if the insurer fails to pay a debt, liability for that debt ultimately rests with the consumer.
Obviously, if a consumer is cooperating, and they want a third party to resolve a claim, there is some room to maneuver – if a third party is going to remit fairly quickly, then there is no reason to be unreasonable with the consumer. However, urgency should be stressed, and the responsibility for pushing the third party to remit should be put squarely in the hands of the consumer.
Third party confidentiality also comes into play – a collection agent does not have carte blanche permission to contact an outside party to discuss payments or coverage without explicit consent from the debtor.
Ultimately, if an account remains unpaid, it means that the consumer will bear the consequences of a negative credit rating, or even a court action. It’s very important to let the consumer know this up front, and lay out a reasonable time frame to resolve the debt, putting the onus on them to reach out to the third party, and report back to the collection agent with their progress. This keeps the chain of authority and liability clear.
If you have any questions about handling collection accounts and dealing with the hurdles of third parties becoming involved, I’m happy to have a discussion – I can be reached directly at Kingston Data and Credit, at 226-946-1730.
Blair DeMarco-WettlauferKingston Data and Credit