The debt collection and accounts receivable industries can be understandably awkward for your business to consider at times. This is especially true if your company is service- or relationship-based (rather than selling a consumer product). For instance, you may have a medical private practice, or run an assisted-living facility. In both of these situations, there is often a long-term relationship established between the ‘consumer’ and the provider. In scenarios like these, it may feel difficult to follow up with delinquent accounts, or to collect on accounts that are past due.
Now take that scenario, and extend it by an order of magnitude: an account holder is deceased. What resources do you have, and what should you consider when deciding whether to pursue this account or not? Let’s explore this sensitive topic a little more…
First, you may be wondering whether this is a common situation at all - and depending on your industry, it may not be. However, take a look at these statistics from the US Census:
Estimated deaths in 2014: 2,552,000
Approximate % of deaths of those who have a probate filed: 25%
Probate is a legal process initiated after someone dies, and one of the functions of this process is to pay off a deceased person’s debts (usually after an accounting of their assets). This means that it’s not uncommon for debt collection to occur on accounts with a deceased account holder. Unlike other debts, however, these accounts require additional consideration.
What should I consider before pursuing debt collection for deceased account holders?
Specialized training and experience. Not all debt collecting is created equal. Pursuing payment from a deceased debtor is not unlike medical collections (which are also special), but you’ll often be working with family members instead of the actual debtor. It’s absolutely critical that whoever is representing your business does so with sensitivity, understanding, and empathy for the family. This will require additional training, and an ability for collectors to gently steer the discussion back to the delinquent account.
Compliance and transparency. This is very important, so that your business doesn’t inadvertently violate the FDCPA, TCPA, or otherwise commit a UDAAP in pursuit of a financial obligation. Examples of this include maliciously (or erroneously) misleading family members into fears of litigation, or pursuing a debt that is time-barred or otherwise beyond the statute of limitations. Each state will have different laws and compulsory practices, so it’s imperative to know the rules where you’re operating.
What are my options to pursue payment from a deceased debtor?
If your business in in the predicament where you are losing on revenue from delinquent accounts and deceased debtors, there are three basic ways to address it: use in-house collections, outsource to a specialty debt buyer, or partner with a collections agency that has specific experience. In the first case, you have to consider whether your staff has appropriate training and expertise to collect in such a sensitive situation. If not, that training needs to occur (probably on your own dime).
Outsourcing to a debt buyer is another option, but that may not be appropriate in service- or relationship-oriented models where you’d like to preserve the relationship; you may be uncomfortable with passing off a long-term family account to someone who does not necessarily represent your company.
Partnering with a collections agency that has specialized training and years of expertise is our most recommended approach. Why? An agency like NSB is interested in partnering with businesses that have aligned incentives, and we understand the importance of conducting collection activities that are professional, ethical, compassionate, and help preserve (sometimes enhance!) the relationships you have worked long and hard for. These are important qualities to keep in mind when considering debt collection for deceased account holders.