Hey Thea,
I have a customer who is not paying their bill and we are ready to send them to collections. We do not have a signed credit application. Can we still charge them interest and the cost of collections?
— I can, can’t I?
Dear Can I?,
One of my favorite games to play during my workday: “Is my headache from dehydration, caffeine withdrawal, lack of proper nutrition, my ponytail, stress, lack of sleep, not wearing my glasses, a brain tumor, my favorite sales rep, or finding out that I have no credit application on a past due account?”
My headache usually ties back to something to do with the last two items. Everyone has an opinion of what we can do to an account after there is an issue and we have to take an action. Then everyone is full of Yoda-like wisdom. “Lien the job, sue them, turn them to collections, we can collect interest, finance charges, and the collection fees.” Well thank you Becky, why didn’t I think of that?
Oh, that’s right, O’ Spewer of Knowledge, it depends on what we have in the customer file and contrary to what everyone else in the company believes to be the solve-all, “lien and sue” is not a flag we can always waive.
Typically, if the customer didn’t agree to your terms and conditions, you just can’t slap any old rando charges on the account. When you sue an account, you can ask for pre- and post-judgment interest and the judge may or may not grant it depending on the laws in your state.
If the customer didn’t agree to pay collection costs or attorney fees, you are at the mercy of the laws in your state and the judge who is presiding in the event you take to the lawsuit level. If you sue and win, the judgment may contain the thumbs up for pre- and post-interest and possibly attorney or collection fees.
It all starts and ends with that all important document, the credit application. Skip this step on any account and those are always the ones that come back around to take a bite out of your profit.
Like anything in life, you can choose to roll the dice. Go ahead and include the charges. If they pay them, awesome. If they refuse, you can huff and puff but in the end without a judgment granting you those fees, they can tell you to go pound sand. Whichever they choose, you may get a call from them sharing their viewpoint. If they do, try to turn the conversation into a settlement discussion. Don’t get so hung up on winning and getting every dime. Collection action isn’t free, so do some back-of-the-envelope math and try to put this thing to bed.
However, all this debate may be a useless preponderance of what could be as the subject of our attention is past due to the point you are ready blow it up. Additional fees won’t cause fear and accountability to suddenly make your wayward account find their checkbook.
Slapping interest and collection fees—along with the cost of whatever therapy you need as a result—on the derelict account when you are empty file and hella frustrated can be a cathartic credit manager move. If they are not going to pay, then let’s just up the ante. I usually find myself sitting at my desk at this point pondering if I am going to start something or let it slide. At the end of the day, you have to pick your battles. Decide if this is the hill you want to die on.
