In 2019, 60 percent of debt collection revenue came from nonfinancial debts like utilities. Collecting on overdue accounts is critically important for municipalities. Municipal debt can leave your city or county with budgetary problems.
You want to recover the money your customers owe you. How can you collect these debts more successfully?
Learn more here about the six best practices for municipal debt collection. You’ll also see how using a municipal debt collection agency can improve your collection process.
1. Collect the Right Customer Information
To collect past-due accounts, you need enough information to find your customers. For example, when people sign up for utility services, collect information like:
- Social security number
- Driver’s license
- Phone number and email address
- Emergency contact or next of kin
This information will help you find delinquent customers even if they stop communicating with your organization.
2. Optimize Your Communications Process
Municipalities need to mail notices and invoices to each household or individual when bills are due or overdue. An efficient and organized process to send letters and invoices makes collection easier.
You can increase efficiency by having the different departments of your municipality share resources. Vendors that provide volume discounts for billing, invoicing, and lettering can reduce your costs. Shared resources can also help you send notices in a more timely manner.
Set a Schedule
For items like tax bills, you can increase the chances that citizens will pay by setting a date to send the invoices in advance. Advertise the date through all available means of communication, like on the municipality website and fliers in public places.
This gives people the chance to prepare. When people are more prepared, they’re more likely to pay what’s due.
Send a Final Bill
Be sure to send delinquent customers a final bill and outstanding account notice. This lets customers know exactly how much they’re liable for paying, including any additional fees. A clearly marked “final notice” motivates some people to pay their bill.
3. Turn Over Past-Due Accounts as Soon as Possible
When accounts become overdue, prepare to turn them over for collection as soon as possible. The sooner you start the debt collection process, the more likely you are to recover the amount due.
Internal collection takes time and effort when your employees are already busy with other tasks. Making the time to notify customers with overdue bills can pay off, though.
Inform customers that if they don’t pay their bill, they’ll lose the affected services. Tell them that you’ll turn the account over to collections after a certain amount of time. You may want to set a limit of 60 days or 90 days.
If your local and/or state statutes allow additional fees for collection, use the overdue billing notification to inform customers. You can advocate for adopting these types of fees if your municipality doesn’t yet have them.
4. Invest in Reporting Software
The right software can improve your debt collection procedures. Your accounts receivable software should let you send documents to customers by email or the postal service. An online payment function makes paying bills more convenient. People are more likely to pay.
You need a software system that will generate data reports for delinquent customers. Review your current software to ensure it has a collection module or function. The software should organize each customer separately and notify you when a bill becomes overdue.
An integrated collections function will let your staff complete tasks including:
- Scheduling appointments
- Scheduling calls with customers
- Documenting communication with customers
- Setting up and maintaining payment plans
The software should create reports with useful data. You can use these reports to increase transparency for municipal accounts receivable. You can also use them to set goals and inform budgeting.
5. Use a Municipal Debt Collection Agency
Municipalities like cities, villages, counties and even school districts can benefit from using third-party municipal debt collection services. If your internal collector hasn’t been able to resolve a debt issue, a third-party agency can help you recover all or part of the debt. Collection services can handle accounts including parking tickets, property taxes, and utility bills.
A third-party agency can be more cost-effective. Your employees don’t need to spend their valuable time trying to track down delinquent accounts.
6. Comply with Debt Collection Law
Your collections activity must comply with federal, state, and local regulations. This protects you against lawsuits. It helps ensure you’re dealing with your customers in a professional and fair way.
Fair Debt Collection Practices Act (FDCPA)
When you use a third-party debt collection agency, they must comply with the Fair Debt Collection Practices Act (FDCPA). Congress passed this law to stop abusive, deceptive, and unfair debt collection procedures. It covers household debts that include municipal utility bills.
The FDCPA regulates what debt collectors can and can’t do to recover a debt. For example, a collector can’t threaten to harm the customer, use obscene language, or call customers repeatedly with the intent to harass them.
State Fair Debt Collection Practices Legislation
Many states have their own laws regulating debt collection. The legislation varies from one state to another.
State laws are often similar to the FDCPA. However, some states regulate the original creditor in addition to third-party agencies.
State laws restrict certain abusive practices. They also regulate communication between debt collectors and customers. Some states have additional requirements for debt verification and disclosures.
Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) is another federal law that applies to municipal debt collection. It regulates how debt collectors can report information to credit reporting agencies. The FCRA requires procedures including:
- Verifying that the right person is associated with the delinquent account
- Maintaining records for a reasonable amount of time
- Updating information as needed
Privacy protection is also part of the FCRA.
Finding the Right Municipal Debt Collection Services
Municipal debt collection is an important part of managing your municipality’s budget. Internal collection processes can be time-consuming and labor-intensive, though. Using a municipal debt collection agency can help you get better results more easily.
First Federal Credit Control knows that navigating the collection process can be a challenge. We’re ready to be your partner in debt recovery. Our municipal collection services can recover the money people owe you without damaging your customer relationships.
Contact us today to discuss how FFCC can meet your debt recovery needs.