When granting a loan to a consumer, the Credit Adequacy Act requires a business to disclose to the applicant the terms of the loan offer. Requirements include annual interest rates, monthly financing costs, payment dates, and overdue payment charges. Cite the content and processing of a loan application and note why this procedure is used. Identify the main elements of a credit policy and note situations in which the policy can be changed. The Fair Credit Billing Act prescribes a procedure for credit settlement disputes. If a Client does not agree with a statement, the Client has 60 days from the date the statement was sent by the Company to inform the Company of the error. The Company must respond to the Client`s notification within 30 days. Within 90 days, the company must change the invoice or explain to the consumer why the invoice is correct. Businesses can provide loans to consumers to increase sales or attract new customers. All businesses that choose to extend credit to consumers must comply with federal and state consumer credit laws, as well as fair collection practices. Indicate what methods are available to develop ratings and the situations in which rating systems may be used. Indicate the main procedures and forms required for the functioning of the investigation function and the situations in which they are applicable. A well-written and comprehensive credit collection policy: identify the key controls required for the credit function and note what they are expected to achieve.
Once you`ve developed your collection policy, it`s important to update it regularly and make sure it continues to be relevant and effective. It`s recommended to do this once a year, but a recent survey by Credit Today found that nearly 50% of companies are much less likely to review their policies. Here are some of the key points of the study: Before offering a line of credit to a consumer, they should conduct a credit check. A credit check requires the company to verify the consumer`s payment history and financial situation and verify the consumer`s credit references. The Equal Credit Opportunity Act prohibits a company from refusing to lend to an otherwise qualified applicant on the basis of race, color, religion, national origin, age, sex, or marital status. Identify areas where other parts of a business may be causing debt collection issues and how you can resolve those issues. This article outlines six simple steps to developing a top-notch credit policy and debt collection action plan that can help you realize significant benefits in your business. List the events that can trigger a credit check. Businesses that choose to lend to consumers run the risk that some consumers will not be able or willing to repay the debt. In order to recover sums owed to a consumer, the company may initiate a formal recovery procedure. The company can choose to collect the debt itself, or it can hire a debt collection agency to do so. State and federal laws govern both types of debt collection.
The collection of claims by the original creditors (the company that granted the loan) is governed by state law. Most state laws require the creditor to contact a consumer by telephone before initiating formal collection proceedings. If the debt is not paid, the creditor must inform the consumer in writing that such proceedings have been initiated. State laws generally prohibit the following collection practices: This guide will teach you the basics of credit management and how to make better and faster decisions regarding loans to customers using modern tactics and tools you may not be familiar with. Along with cash and inventory, trade receivables are one of a company`s most important current assets. The more you can convert your predictable and efficient reporting account, the healthier your cash flow will be. One of the most important factors in effectively recovering money owed to you is consistency. By having a formalized plan that your employees follow, and documenting all the steps and communications along the way, your team will become much more consistent, effective, and efficient at capturing great customer accounts. A credit and collection policy is a document that contains “clear written guidelines that set out the terms of delivery of goods on credit, customer eligibility criteria, collection procedures, and actions to be taken in the event of customer default.” In a nutshell, it is a guide that provides an organized and repeatable philosophy for selling the credit and collection rules, regulations, and procedures to manage day-to-day operations. The goal of a credit collection plan is to clearly define these elements so that sales and collection agents follow documented steps and procedures to optimize your resources, reduce credit risk, and improve overall cash flow.
The Commercial Regulation of Credit Practices Rule prohibits lenders from including the following provisions in a consumer credit agreement signed after March 1, 1985: Specify the methods available to mitigate the risk associated with the loan. If a company hires a debt collection agency to collect the debt, it must ensure that the agency complies with state collection laws as well as the Fair Debt Collection Practices Act (FDCPA). The FDCPA determines how and when debt collectors can contact consumers and prohibits all abusive and fraudulent collection tactics. Abusive and deceptive tactics under the FDCPA include: Identify key metrics used to assess credit and collection performance, and note how these metrics should be used. Indicate why you use a collection agency, when to use one, and what fee structures they use. Identify the reasons for litigation and methods of collecting favorable judgments. Table of contentsChapter 1. Credit and recovery operationsChapter 2. Credit proceduresChapter 3. Credit controlChapter 4. Recovery proceduresChapter 5.
Control of recoveryChapter 6. Credit policyChapter 7. The loan applicationChapter 8. Customer credit ratingsChapter 9. Ongoing credit monitoringChapter 10. Interpretation of financial statementsChapter 11. Credit Risk MitigationChapter 12. Settlements with clientsChapter 13.
Payment ProcessingChapter 14. Recovery TacticsChapter 15. DeductionsChapter 16. Skip TrackingChapter 17. Chapter 18. Litigation and Bankruptcy TacticsChapter 19. Value adjustment for doubtful invoicesChapter 20. Credit and Collections TechnologyChapter 21. Improvement of products and servicesChapter 22.
Credit and collection measuresChapter 23. Credit and Collection Laws Identify the main tactics used to collect money from customers and note how these tactics can be improved. Specify the sources of information used to locate clients about jump tracking and the circumstances under which jump tracking may be required. The trade regulation rule on credit practices also requires companies to disclose all potential liabilities to co-signatories before requiring the co-signer to repay the debt. Specify the classification of the value adjustment for suspicious accounts. Specify the methods used to achieve an efficient and effective resolution process. Your policy can be as general or specific as you want, just remember that to protect your cash flow, it is best to equip your employees with knowledge and predefined reforestation practices and procedures so that they always know what to do in certain situations and can respond quickly and confidently to resolve issues or answer questions. List the methods available to process customer payments and note who is involved in this activity. Specify the methods used to estimate the amount of the value adjustment for bad debts and how this value adjustment is to be taken into account.