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Navigating the Legal Landmines of Collections Communication

by | Dec 19, 2023


[00:00:00] Jim Sorenson: Hello, everybody. I want to welcome you to the Banking on Credit Unions podcast. I am your host, Jim Sorenson, and I’m excited for today’s episode. I have with me today my partner, Steve Orsillo. He’s with me, and we’re going to be discussing the art of communication essential tools for the dialogue with debtors.

[00:00:22] The whole idea today is to discuss the tools that exist, the technology that exists for communicating with delinquent borrowers, and we often get a lot of questions about this. We get questions about what the law allows. Can we use this type of technology to communicate with the borrower? Can we do this?

[00:00:44] Is there a specific concern with using these types of technologies? The one we probably get the most questions about is text messaging, and we’re gonna discuss that today. I want to start off by pointing out that there are no regulations that [00:01:00] ban or prevent a particular mode of communications.

[00:01:04] In other words, there’s not a law or regulation that says, hey, you can’t text the delinquent borrower. You can’t call a delinquent borrower. You can’t send an email to a delinquent borrower, but there are regulations that focus on certain behavior. And so, they look at things like consent to communication.

[00:01:22] They look at things like privacy of the borrower and preventing harassment. And so these are the things that we’re going to be talking about today, and I’ve asked Steve to join me because Steve has spoken on this issue before at credit union events and these are questions that we get often aren’t they?

[00:01:42] Steve Orsillo: Very common question. Always great to be here with you, but yeah, I think this is obviously we do this for source expo and these different things. And this is kind of one of those hot button topics every year’s communications essential in collections, right if you’re trying to recover money, you know, telephone, [00:02:00] text message, email, and we see with clients, all forms of communication, try to reach out to people.

[00:02:04] I think this is one of those topics that always comes up, he’s kind of, you know, clients perk up or credit unions perk up. And, when you talk about this one, so it’s a good one.

[00:02:13] Jim Sorenson: So what are some of the questions that you get about these issues, about communication tools, communication means?

[00:02:19] Steve Orsillo: Yeah, I mean, clients are always looking for, I think, new ways within which to communicate with the members, with the borrowers, the debtors, however you want to refer to them to communicate their concerns about, what can they do, what can they not do under the TCPA, with, you know, phone calls, and then you’re communicating by text message and emails you know, debtors in bankruptcy, what can we do there and not do there.

[00:02:40] Just all sorts of different things that come up, site visits, door knocks and all those sort of things are just kind of common themes and questions that come up.

[00:02:48] Jim Sorenson: Yeah, and this is a topic like you’ve pointed out. We get a lot of these questions at the source expo, our annual credit union conference that we do, we get these questions [00:03:00] from clients just in terms of looking at their individual process and procedure.

[00:03:05] So, well, let’s start by kind of defining some of the applicable laws that apply here to this discussion of means of communication. So what are the laws that they were dealing with or that interact with this issue?

[00:03:19] Steve Orsillo: Yeah, I think there’s several different laws that credit unions, have to be aware of and deal with and be cognizant of. You got the TCPA, the Telephone Collection Practices Act. Obviously a real you know, hot button, common one that always comes up in Florida. We have the Florida Consumer Collections Practices Act, the FCCPA, I believe.

[00:03:36] Kind of mirrors the FDCPA, but the difference here is that this Florida Consumer Collections Act, that’s going to apply to credit unions. You know, the FDCPA, you got some exceptions there about whether it applies to credit unions or not but it does apply in Florida. So that’s something every credit union collecting in Florida needs to be aware of.

[00:03:52] And then you’ve got, Florida’s financial rights and privacy laws, you got federal privacy laws you need to be aware of, and then obviously the CFPB[00:04:00] you know, everyone has heard of that at this point, is where they’re constantly putting out guidance, every sort of little thing out there, they like to jump in there and give their two cents on it. So, obviously, something to always keep an eye out for as well.

[00:04:11] Jim Sorenson: And I think the hardest part about the last one, the CFPB, is a lot of their guidance is not in the traditional form of a written regulation or a written law. It’s more edicts and directives that they issue. So, it’s either they’ve taken action against the lender, a credit union, a bank, or some other financial institution, and they’ve said, hey, this is what you’re not supposed to do, or in their supervisory comments that they give.

[00:04:38] Steve Orsillo: They indicate these types of behaviors are problematic. So it leaves a lot of times with the CFPB. The problem is there’s not a clear answer on some of these issues. So I’ll let you know how they feel and you know, they expect you to kind of go with their opinion or else kind of very interesting.

[00:04:56] Jim Sorenson: So let’s start with the telephone Consumer Protection [00:05:00] Act the TCPA and what technology does this apply to? ’cause this is one we get a lot questions about. Does the TCPA impact this or does it impact that? So what are the technologies or means of communication, if you will, that apply here?

[00:05:18] Steve Orsillo: Well, obviously the big one is the name indicates, right? Telephone. So obviously telephone calls. If anyone’s speaking on the telephone, obviously, these credit unions have, you know, traditional landline, I guess, type phones applying there, but also the big means of communication, right? Nobody wants to talk on the phone anymore.

[00:05:33] They want to text. So text message, obviously applies there as well, which is a new thing that some credit unions are utilizing to try to communicate with members that, you know, are behind on loans to figure out what the situation is. And then voicemail messages as well.

[00:05:46] So we’re talking about technology here that just drops a voicemail message without ringing your phone. We’re talking about this a little while ago, you know you got all the symbols. I didn’t see the phone ring, but I’ve got this voicemail here Where did this come from? Yeah, so that sort of thing where you’re [00:06:00] just kind of dumping a voicemail message on somebody. But that’s only really gonna work we’re talking about cellular phones in that situation.

[00:06:05] And it also addresses, cell phone numbers are addressed under there as well in terms of collection calls. So those are kind of the big ones.

[00:06:11] Jim Sorenson: Yeah. And the thing that people need to remember when we talk about the TCPA, there’s a set of rules for marketing calls, and we’re not talking about marketing calls today because we are focused on what would be considered a collection call, collection communication. So, the marketing rules don’t apply to that. So, in the marketing realm under the TCPA, it can apply to calls to the residential landline for purposes of collection calls it’s only applies to calls to a cell phone, but most borrowers, their only phone is a cell phone.

[00:06:45] Other than maybe they provided a work line, they’ve got an office number or a work number and that may not be a cell phone. But usually what is now their personal number is a cell phone. And so this law obviously impacts a lot of the phone [00:07:00] calls that collections departments are making.

[00:07:03] So it’s important to kind of understand the limits of that law. So what means of communication does the Florida Consumer Collections Practices Act apply to? Are there certain ones this applies to and doesn’t apply to others?

[00:07:17] Steve Orsillo: It’s all technology. We have FCCPA here in Florida. So yeah, any means, telephone, text, email, whatever means of communication in person, face to face.

[00:07:26] Jim Sorenson: Yeah.

[00:07:26] Steve Orsillo: If they come into the branch, you go to their house, whatever, yeah. It’s gonna apply.

[00:07:30] Jim Sorenson: Yeah. The Florida Consumer Collections Practices Act, or as we call it, the FCCPA, does have these you know, I always joke about the 17 commandments or 18 commandments, whatever it is. There’s a lot of thou shall nots in the statute, and these would apply to any form of communication.

[00:07:49] And some of these are pretty basic rules. We’ve talked about these before. Some of them are, you know, you can’t use abusive language. You can’t threaten violence. We all know [00:08:00] that those aren’t the things that we’re concerned about for most people they understand that and but I’m referencing those because obviously, again, the law would apply to the written letter.

[00:08:10] It would apply to a text message. It would apply to an email or a phone call, but then there’s other parts of the statute that aren’t as clear. And we’ll kind of talk more about that in a second.

[00:08:21] So, which communication tools does the federal and state privacy laws apply to?

[00:08:27] Steve Orsillo: Faderal laws, again, are going to apply to all means of communication with the exception of being regular mail, write a letter or something like that.

[00:08:34] And, the reasoning there, obviously, is it’s a federal crime to open someone else’s mail. You can’t take someone’s mail out of the mailbox and open it up, or even, you know, technically, you couldn’t open up my wife’s mail, right, or my kid’s mail, or whatever the case may be. So, that’s kind of the reasoning there.

[00:08:48] Jim Sorenson: Yeah, I think this is one that people forget, the privacy laws are strict standards of privacy. And so, even though you may [00:09:00] intend a message or a communication to go to your borrower, if it is intercepted by a third party, Then you have violated the law. So intent doesn’t matter and so, you know, the safest form of communication is a letter, but we also know that’s probably the least effective because most letters are going to see a letter from the credit union.

[00:09:26] They know they’re delinquent on the loan. They have no incentive to open it up. They’d rather just throw it away and ignore the problem, which is the problem.

[00:09:34] Steve Orsillo: Yeah, but who knows how many people are actually checking the mail on a daily basis these days, right? Couse you’re not expecting everything, because the bills and everything are emailed and autopay.

[00:09:41] And then, when it does come in, nowadays I’m just prone to think, post mail’s junk. So, am I really going to start digging into stuff? And so, yeah, but it is safe in the sense, right, like you’re saying. Not to worry about, oh, John Doe neighbor accidentally opened it up or read it or saw something.

[00:09:56] Jim Sorenson: And I think that’s part of the recognition that [00:10:00] clients have to come to is there’s safe ways to communicate with a borrower, but they’re not always very effective. And then there’s more risky ways to communicate with a borrower. And so when you move on a technology, such as text messaging we all know text messages are easily could be intercepted by somebody else. I could have my phone sitting here. You and I are talking. I get up to go to the restroom or go grab a drink or whatever. And I leave my phone on the table and a text message pops up. And depending on the settings on my iPhone, you may be able to see the text message.

[00:10:37] And again, it wasn’t intended that you saw it, but you did see it. And so, technically, if I know that as the consumer, I could argue you, you know, the sender of that text has violated my privacy if that text contains what would be protected information under those privacy laws.

[00:10:55] So, that’s the part that always gets people and, I’m not, we obviously aren’t [00:11:00] saying don’t use text messaging. We’re just saying you need to be aware of the risk, given the privacy laws, whereas mail has none of those risks, but it’s probably your least effective tool in communicating.

[00:11:13] So, what about the guidance by the CFPB? Does this apply to one particular type of communication tool or how does that work?

[00:11:23] Steve Orsillo: Well, I think as you kind of alluded to the CFPB will put out guidance on whatever it wants to, whatever it thinks, you know, the new thing to be worried about is, it focuses on all communication tools that are out there, mail, email, text, phone calls. But again it’s, in today’s age, we’re probably talking more towards new technology.

[00:11:42] Common technology methods, text messaging email, things like that, that people are more prone to look at than a piece of mail.

[00:11:47] Jim Sorenson: Yeah. And it seems to me that what the CFPB is doing is kind of supplementing the law. So, there’s a lot of laws on the books that have dealt with telephone calls for a while. I [00:12:00] mean, phone calls have been around for a while.

[00:12:02] Obviously that technology has existed and the law is always slow to evolve to technology, right? We now see the U.S government trying to deal with AI, and there are no real laws or regulations on AI and the the president has announced some things he’s gonna try to do from executive order, but it’s always reactionary and I feel like that’s what the CFPB does.

[00:12:22] So, they’ve given some guidance on emails and text message and some of these things that aren’t necessarily specifically addressed in other laws. Again, text message does fall under the TCPA, but emails is kind of one of those. And so when the CFPB put out the guidance under the FDCPA the FDCPA regulation, which again does not directly apply to creditors collecting their own debts, so credit unions collecting their own debts, but there’s some guidance in there about email that can be effective and [00:13:00] probably become best practices for our credit union clients.

[00:13:04] So those are things that, people need to be aware of those are things that credit unions and collection departments need to be aware of.

[00:13:10] Well, let’s talk about text messaging for a moment. This is the one that I probably get my most questions. If we’re going to just focus in on the various means of communication, this is the one.

[00:13:22] So, what are some of the general rules or guidance on using text messaging? What do we kind of say? Here’s the best practices or things you need to be aware of.

[00:13:31] Steve Orsillo: Yeah. I mean, I think the first thing, you know, when someone reaches out and asks about it, and different things, the first thing you gotta do is confirm you have the proper consent. You gotta have the consents under the TCPA before you can start sending out text messages.

[00:13:42] So, do you have some sort of agreement in place, the law documents, whatever the case is, you know, is it providing the proper consent before you start just firing off text messages to the member office, you want to make sure that’s in place. And you have a process in place as part of that where you can kind of track opt in and opt out because, you always have to [00:14:00] give the member the option to opt out of these text messages, right?

[00:14:02] You get these text messages, even if it’s not in a collection setting, but just in general, right? The option to reply, stop, to opt out of it. So you got to make sure that you’re tracking that because if you’re not and the members opted out and you keep communicating, you know, now you’re going to have some pretty serious problems.

[00:14:15] So I think those are things. Those are kind of the initial things to think about and look at, make sure, one, do we have the right, you know, the proper consents in place, and then are we tracking opt in and opt out as well to make sure that we’re not, continuing to violate this thing on a consistent basis.

[00:14:29] Then you have to have the software in place that allows texting to be used in an efficient and effective manner. I mean, texting, obviously, clients probably enjoy it because everybody knows, if anything, you look at a text message, right? You may not respond, but Most of us, maybe not necessarily all of us, you know, get a look at a text and at least see what it says, I think. Making sure you got the right software there, is important, so.

[00:14:51] Jim Sorenson: Yeah, and I think on the software, which I’ve seen some of the different texting solutions that are out there for credit unions for collection departments [00:15:00] and some is better than others, to me, if the collection software integrates with your collection software, so that a record of the text message is automatically included or uploaded into the collection notes that is definitely more efficient. Then having to look at another system to see if a text message was sent or having records and more than one system. So, you know, and then the ability right to send text messaging and batch.

[00:15:28] Can I just batch these certain accounts and send a text message out on them where it’s all the same message to 100 different members that meet a certain criteria or can I have the text message go out at a certain. day of delinquency. Some of the texting software has that more has more flexibility than others.

[00:15:47] So, the client needs to think about that. Does the text message software allow for responses? Because one of the things we see, and we know this is true, \ if you send a text message that says, Hey, you [00:16:00] know, please contact ABC credit union. We’re trying to get ahold of you, Steve.

[00:16:04] Some people are going to call, right? They’re going to do what that message says. But some people are going to respond, try to respond to the text. I know this is about my auto loan. Just tell me what I owe, right? How much do I have to pay? Or I’m going to pay it by Friday, whatever the math response back.

[00:16:22] Well, if the software doesn’t capture that response and put, give that response to some human to be able to deal with, right? Whether it’s a follow up call or to track the promise to pay if there’s a promise to pay in that text message. So the software has to be dynamic enough to do that. And again, some software is better than others.

[00:16:43] We aren’t in the business of making recommendations, but we’ve seen some better ones and some ones that aren’t as good. So I think that’s something that you’ve got to decide about.

[00:16:54] What else? What are some of the other guidances?

[00:16:56] Steve Orsillo: Well, I think kind of what you to go off what you’re talking about here in terms of the match [00:17:00] texting, right?

[00:17:00] Do we want to just have a form message? Or are we going to allow our collectors to engage in a conversation? Well, maybe a more personalized conversation directly towards the member and their situation, because obviously that can be an effective collection tool is to figure out, hey, what is going on member, that I can help solve it, right?

[00:17:16] Help us help you recover the money, resolve the delinquency, all those sort of things. And so I think. What’s your tolerance for risk? Obviously, there’s going to be more risk if I’m letting the collector engage in a conversation versus controlling it and going, Alright, this is what we’re going to say.

[00:17:31] If you’re going to tax, this is what you’re going to say. I’ve already pre approved the language. So you’ve got to kind of think about those things. And then, obviously, like I said, make sure you’ve got an opt in, opt out disclaimer. That’s always important. And then also in our recommendation on texting is a means of communication, along with anything you’re doing in your collection department, right?

[00:17:49] Is to have a written policy and procedure in place to provide guidance for your collectors, your team members. So everyone knows what they need to be doing and not be doing. And they’re not just sitting out there running wild, [00:18:00] sending text messages and not, you know, violating the law and all sorts of stuff.

[00:18:04] So I think that’s always important to make sure you got a procedure in place that governs what and how you’re going to use text messaging guidance for, you know, staff and how to use the tools. I think those are all important things.

[00:18:14] Jim Sorenson: Yeah, no those all are. And I think those are good points that clients need to think through.

[00:18:20] When they do and you’ve hit on this and we’ve already talked about it once. But again. How much risk are you comfortable with? And this is always the discussion that I try to encourage the collection manager, the collection, whoever’s over at the collection department, whatever your title is, whether it’s a manager or AVP or VP director, whatever that title is, you have someone higher up you answer to, and, you know, if you’re doing text messaging.

[00:18:46] What is not just your level of tolerance for risk, but what is the credit union’s level of tolerance for risk? So what is your boss’s tolerance for risk? What is their boss or the CEO’s tolerance for risk? So, [00:19:00] I may be okay with a lot of risk, but I’m not the one who’s going to stand in front of the board and answer to the board and the CEO may not.

[00:19:07] So, again, these are discussions that need to happen and there needs to be understanding. And a lot of times I think. The general advice of, you know, if you’re going to go down this road, maybe start off by crawling before you get to walking or walk before you start running. So you can always start the text messaging just doing canned messages and then open it up from there.

[00:19:30] Once you see how it’s working and how effective it is, I obviously text messaging seems to be a great tool. If your membership is younger, You know, I know with my own kids who are in their 20s or late teens, we’ve had this conversation before and I’ll call, and leave a message for my son, my middle son, and he’ll text Dad, what do you want?

[00:19:53] In the middle of me calling. Because he doesn’t want to talk on the phone. And of course, my response is pick [00:20:00] up the phone and call me. I don’t want to text. I want you to call me, but I’m his dad. I can handle that different than a collection department. So, but again, you know, don’t just jump into texting without thinking these things through.

[00:20:13] And these are things that obviously Steve or I and our firm has helped clients walk through these things. We’ve helped clients set these things up. So, this is important. We also seem to get a lot of questions about doorknock services.

[00:20:29] So, under Florida and Georgia law we’re Florida, Georgia lawyers. I’m Florida, Georgia lawyer. You’re a Florida lawyer. We only talk about those laws. So I don’t know what the other 48 states allow, but in Georgia and Florida, is doorknock services allowed?

[00:20:45] Steve Orsillo: I think simply speaking in Florida, yes, you could utilize a doorknock service if you wanted to, and I assume, I think, Georgia is kind of the same way.

[00:20:52] Jim Sorenson: Yeah, it is.

[00:20:53] Steve Orsillo: But yeah, there’s nothing that prohibits it. Obviously, there’s things to be cognizant of in terms of privacy laws when we start banging [00:21:00] on doors and having communications out in the open with people where others may be able to hear it. But simply speaking, yeah, you could engage a doorknock service in Florida.

[00:21:07] Jim Sorenson: Yeah, I think that’s one of the things that we get a lot of questions on. And, you know, there’s not an outright prohibition on going to knock on a door regarding an outstanding debt. But the question becomes, is it effective? What’s the risk? What’s the reward? Most credit unions don’t want their own employees going out and doing this.

[00:21:27] And at today’s day and age, that it’s a little dangerous. There are companies who do this. There’s a cost to this, this is probably your highest cost means of communication. What we see is some clients use it in the foreclosure world. And I think in the foreclosure world, it has its place, even if the door knock service doesn’t knock on the door, they’re just more of a field visit.

[00:21:48] And they go to see the condition of the property, make sure the recent tack, those types of things. Does it appear the homes vacant or occupied? All that can be helpful information, but the ability to go and [00:22:00] knock on a door and say, hey, credit unions trying to get ahold of you.

[00:22:03] They really want to speak with you. Nothing’s wrong with that. The concern, obviously, like you said, is the privacy concerns. And, if you’re going to a home where they live on 3 acres, and there’s no neighbors nearby, and the borrowers, the only one at home, or the borrowers are the only one at home, no big concern there, but if they’re in an apartment building where their neighbors can hear, and you’re having a conversation about their delinquent loan, and the fact that they’re, Honda Accord may be repoed in the next day or two and their neighbors overhear it. Yeah, concern. So it’s all in how you handle it.

[00:22:37] Steve Orsillo: It’s probably why it’s important to go out there and do your homework and make sure you find a reputable door knock company. Talk to other credit unions in the industry that utilize it and figure out who’s good and who’s reasonable and engage them before you start down that path.

[00:22:50] Jim Sorenson: And have a good contract in place that shifts the, make sure that they bear the liability If their employee goes off the rails, if their employee does something wrong.[00:23:00]

[00:23:00] So, how does bankruptcy complicate this discussion? We’re talking about different means of communication. You know, I want to touch on bankruptcy, but how does bankruptcy complicate the decision about what tools do we want available for our collection department to use?

[00:23:19] Steve Orsillo: You know, any time a bankruptcy is filed, most collection departments immediately become concerned, right?

[00:23:23] Because you got this automatic stay in effect. You can’t continue to collect these debts of the member that’s just filed. So, yeah, you’ve got means of communication going out, all sorts of automated notices, late notices, monthly statements, the list out and the amount. You know, all those sort of means of communication.

[00:23:39] You need to obviously cease those and flag your system to cut those off once they file bankruptcy. And this stays in effect otherwise. You’re violating all sorts of issues there something to think about and then communicating as well, right, text messages, emails, phone calls. Obviously, we shouldn’t be calling members or sending out text messages going, hey, your payments, seven days passed through, whatever the [00:24:00] case may be, when there’s bankruptcy stay in place.

[00:24:01] So, we’re kind of more or less ceasing most, if not all communication once bankruptcy is filed. So it’s important to make sure you got systems in place, to kind of, you know, catch those things and shut things down so you don’t violate bankruptcy is a big problem. I’m sure you’ve seen a lot of it. So.

[00:24:17] Jim Sorenson: Yeah, and I think this is again where you’ve got to think about all the different various tools you have and how they integrate. So, it would be great if you could go into one spot and stop all your forms of communication. But, if you have a separate texting software that doesn’t integrate with your core system or your collection system, so you got to stop messages from going from the core, you got to stop messages from going from the collection software.

[00:24:43] You got to stop messages from going from the texting software. And then on top of that, we’ve got door knock people out there and we’ve got to make sure that if we’ve assigned this to a door knock that as soon as we get notice, we’re now communicating with the door knock to not go knock on that door.

[00:24:59] We may [00:25:00] have assigned it 2 days ago. And they’re on their way to knock on the door today, and it’s on their afternoon run and we get notice in the morning. Can we effectively cut that off? So these again, play into the conversation.

[00:25:13] Steve Orsillo: It gets the client, they think they’ve turned everything off. And then, you know, long old statements are going out.

[00:25:19] And now the members, bankruptcy attorneys calling up going, why are you guys bailing the state? We didn’t do anything. And then you go look and we missed. Like you’re saying, oh, we didn’t cut off the text software, whatever the case may be. So yeah, it’s important to keep track of all those things.

[00:25:33] Jim Sorenson: And that’s obviously part of that risk reward analysis, so, I like to make sure clients are thinking about that, as we kind of bring this conversation to a closure. I do want to point out. I think something that’s very important in it and it’s not necessarily discussing the various means of communication, but making sure that we always keep focused the purpose of collection communications.

[00:25:58] This is something that [00:26:00] anybody who’s heard me talk before who’s read my book. I wrote they’re going to be aware of this. I talk about this often, but I think it’s one of these things. There’s such a lack of understanding in the collection world. What is the purpose of collection communications?

[00:26:16] And we know, it’s not to harass the debtor. People know that they’re not supposed to harass, but if you took the average collector from the average credit union, and you sat them down and asked them, what’s the purpose of you calling the debtor? What’s the purpose of you texting the debtor?

[00:26:31] We’re going to get a bunch of answers. And if you press them on this, it starts to sound like harassment. It starts to go in that direction. And, you know, what people need to remember is the purpose of collection communication is threefold. It’s to convey information, it’s to gather information, and it’s to look for a solution or resolution of the delinquency.

[00:26:54] So, when I say convey information, this is, hey, Mr. Smith, do you realize your loan’s past due? [00:27:00] And in certain situations, the conveying of information may be different than others, right? We know that if the credit union has force placed insurance added to an auto loan, and under their force placed insurance, they increase the Payment of the loan to compensate or cover the insurance advance then, you’ve got a member who’s making the old payment, not the new payment.

[00:27:23] Do you realize Mr. Smith that your payment has gone from 300 a month to 450 a month and you’re falling further and further behind. That’s all part of conveying information. Obviously, gathering information is to find out what’s going on with the debtor. This is probably the hardest part of the collection process is getting the person on the phone to have that conversation to gather information.

[00:27:47] Steve Orsillo: Feel comfortable enough to open up.

[00:27:49] Jim Sorenson: So, hey, what is going on? And we need to know that so we can ultimately, the third purpose, find the solution or resolution of the delinquency. So, if they’re just, you [00:28:00] know, if they’ve lost a job and they’re temporarily short on money, do we have some options that can help them?

[00:28:05] If it’s a long term situation where, they had a serious health issue, and now they can no longer return to a stressful job. So their income’s been cut permanently moving forward. Maybe they’re on disability. That’s different than, hey, I was out of work for a week in the hospital for a gallbladder issue or a appendix issue, but I’m all better now and I’m back to work. I just had an interruption income.

[00:28:28] Well, those are the things that we need to know so we can find the solutions. So, as you think about the purpose of communication, you need to understand that once you can no longer fulfill any of those purposes, once you can no longer, there’s no more information to convey, the borrower understands they’re delinquent.

[00:28:47] They know the payment. They just don’t care. There’s no further information to get the borrower doesn’t manage their finances well, and they’re not going to pay the credit card anymore. They just made that [00:29:00] decision and there’s no resolution because they’ve already decided they’re not paying it.

[00:29:04] They don’t care what you do to them. Then further communication at that point. Begins to start to look like harassment.

[00:29:10] Steve Orsillo: Yeah, serves no purpose.

[00:29:12] Jim Sorenson: And so, this is the thing we try to get our clients to understand. Communication for the effect of communication. Yes, let’s continue to reach and talk to the debtor if there’s a chance that we can reach a resolution, but once the debtor says, I’m not paying, I don’t care what you do to me, leave me alone.

[00:29:31] The purpose behind communication is ended. And so communication needs to end and the situations needs to be escalated to that, whatever the next stage is i.e, we, you know, charge off the loan if it’s an unsecured loan and decide whether we’re going to take legal action or not, maybe set off on some monies and deposit accounts. If it’s an auto loan, it’s time to go get our auto, even though we don’t want to. There’s no other option. And of course, in the foreclosure realm, it may be time to start foreclosing assuming [00:30:00] we get to the 120 day rule. So, I’ll close it with this and I’ll give this example.

[00:30:05] And this is a real example. And not going to obviously disclose the client that was involved, but this is from a while ago in my career, but I had a situation where credit union I got called from in house lawyer at a credit union and he says, hey, Jim, we’ve gotten sued in a case, something to do with harassment, debt collection stuff.

[00:30:28] I think it’s a bogus claim. Can you defend it? And, you know, sure, we’ll be happy to defend it. Go ahead and send us and I tell him what information to send. And of course, we get the complaint. We get the information that the client provides. I think I went back and asked for some more information because I wanted to see there was an allegation of the credit union harassing calls that they were calling with such frequency to the debtor that they were harassing the debtor.

[00:30:54] And so, I needed to know how many calls that we had the client committed during this time [00:31:00] period or attempted during this time period. And so when I got the call records and looked at them in a two month period, the credit union had attempted, or it was actually, they were using an outside agency, but still it’s the credit union.

[00:31:14] It’s the credit union’s agent had attempted 97 calls over a two month period. And these calls did not happen on weekends. So really, if you take 60 days and you take the weekends out, once I noticed that, once I understood those facts, I called the client up, called the in house lawyer up that had referred the matter to me.

[00:31:38] And I said to him, hey, We need to settle this case. This is the loser we’re going to lose. We need to settle. And he’s like, what’s so why? I thought it was a bogus claim. And I said, well, you know, here, let me tell you. And so I told him about the 97 calls and I said, here’s the problem.

[00:31:54] We put the witness on the stand, right? The person who’s calling on this account and I [00:32:00] asked them, Or the lawyer on the other side, ask them more appropriately. It’s going to probably be the plaintiff’s lawyer. Ask them, what did you think the 96th 7th call was going to accomplish that the 96 call didn’t accomplish?

[00:32:13] What’s going to be their answer? And then they’re just going to march down. What did you think the 96 call was going to do that the 95th call? I mean, again, at some point it became apparent this debtor in this example, in this case, the debtor had no intention of working with the credit union.

[00:32:31] They had effectively told the credit union to pound sand. And at that point, the credit union should have charged it off. And gone to whatever the next stage is now, if the next stage is nothing, because they don’t do recovery, then so be it. That’s the business decision. The credit union has made.

[00:32:48] But if you are going to work it in a recovery attempt, then maybe litigation is appropriate and taking that borrower to court. I don’t know if the bar was [00:33:00] collectible. That isn’t the point, but the point of the story is that no matter what we’re talking about when we’re talking about communication, the clients need to keep the primary focus on what is the purpose of the communication.

[00:33:13] And if you keep that in sight, you’re going to avoid a lot of problems. It’s when that goes off site and it’s, just get me a payment. Just keep calling until you get a payment. That starts to look and sound like harassment.

[00:33:26] Steve Orsillo: Oh, for sure. So, it’s a lot of calls.

[00:33:29] Jim Sorenson: It is a lot of calls. It is a lot of calls. Well, Steve, thank you for joining me today.

[00:33:36] It’s been an enlightening discussion. I hope the listeners have enjoyed what we’ve discussed today. And we’ve provided some useful information. If we have, please like and subscribe to the podcast. We can be found on Spotify. We can be found on Apple podcast, iTunes and Amazon and any other place you find your podcast.

[00:33:58] If you want more [00:34:00] information about prior podcast, you can go to our website, www., and there’s information there. You can sign up there also for our newsletter. If you’re not already receiving our newsletter or other emails and communications from our office. But again, Steve, thank you for joining me today and look forward to doing our next podcast together.

Collecting delinquent debt is a tricky business—make one misstep communicating with borrowers, and you could face serious legal consequences.

In this Banking on Credit Unions episode, Attorneys Jim Sorensen and Steve Orsillo walk through the ins and outs of collections communication. Learn what laws apply to phone calls, texts, emails, and even door knocks. Discover best practices for leveraging different techniques while avoiding harassment allegations. Jim and Steve also share critical advice for cutting off contact when bankruptcy strikes. If you’re collecting debt directly or hiring an agency, this info could keep your credit union out of hot water.

Tune in now to successfully navigate the legal landmines of collections communication!

Other subjects we covered on the show:

  • Do the latest TCPA regulations allow you to phone or text delinquent borrowers freely? Get the real deal on legal collection communications.
  • Is force-placed insurance throwing monthly payments out of whack? Make sure borrowers get the memo.
  • Struggling to get debtors to open up about their financial woes? Pro tips for gathering the intel you need.
  • At what point does calling a debtor turn from persistent to harassment? Don’t cross the line in your collections crusade.
  • With massive data breaches in the headlines, are texts and emails risking member security? How to communicate safely in the digital age.
  • Want to send collection agencies or door-knock services to collect? How to properly contract out for maximum legal coverage.
  • Automatic bankruptcy freezes most communications in their tracks—but what systems do you need to have in place organization-wide to avoid slip-ups?


You can check out the full episode and subscribe at

If you want to know more about the SVL Law Team, reach out at

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