Keeping the Crooks at Bay: Tips to Avoid the Advance Fee Scam
The advance fee scam has become a major topic of conversation for commercial collectors as a team of crooks seem to be targeting the sector of the account receivables management industry. Collection experts are telling insideARM to get the word out. Lesson 1, if it looks too good to be true, it is.
Guest Blogger David Matten, owner of National One Credit Corp. in New York City, successfully fended off the crooks when they approached his firm. Matten offers some pointers to ensure your company isn’t the next victim.
HOW COLLECTION AGENCIES CAN AVOID BEING SCAMMED
With the emergence of Voice over Internet Protocol (VoIP) technology that allows you to work from any country and change how your number reads on incoming caller ID’s as well as an increase in online scams, collection agencies have now become the target of sophisticated international scammers looking to gain control of your trust accounts. You may have heard this one before… “If you don’t receive the check by tomorrow, simply provide us with the wiring instructions for your trust account and we’ll wire it immediately.” Don’t be surprised if you get a call from a merchant 2 or 3 weeks later stating your check bounced or your bookkeeper asks you why you purchased a new laptop in China. The scammers simply took the account number you provided and included your routing code (which is public record if they know where you bank), and the only thing left to do is provide a starter check number such as 99999 on their check drafting software. You would only find out about it after there is a discrepancy in your trust account (and this could take weeks to catch).
1. The first and most important is NEVER UNDER ANY CIRCUMSTANCES wire funds to a client prior to clearance regardless of the pressure being placed on you to do so (and try to avoid wiring altogether). You must make it clear that your policy is to only remit upon clearance and you should maintain internal controls that only release funds once they have cleared (in the case of foreign funds this could take months). As most of us have existing relationship with banks, a portion of our funds are likely to be made available much sooner and the scammers know this and hope you remit even a small portion.
2. If you receive an international claim make an attempt to call the client and confirm a working telephone number. Even if it’s after hours you may get a voicemail at the business that confirms the entity exists and that’s a start.
3. Open a separate wire trust account independent of your operating and trust account and then simply move the wired funds to your trust once received. You thereby maintain a zero balance in your wire account at all times and there is nothing left for a scammer to debit or write checks off of.
4. When dealing via email only - do your due diligence when the client emails you from public sources such as Yahoo, gmail, AOL, etc., as most legitimate companies have web sites and email addresses via their internal web hosting such as dmatten@national1credit.com. If you are getting a non-working number on the clients end (especially if it’s international) find out why that is. If client gives you excuses this should be cause for concern.
5. If you receive an email placement from a questionable entity then you should put everything after the @ symbol into your web browser and check out their web site. You may find you are dealing with nothing more than a free internet email provider.
6. Every check received over $10,000 should be verified - PERIOD. It takes 3-5 minutes to accomplish and saves you big time if the check is counterfeit. Simply do a quick online search for the paying bank and fax them a copy of the check. Most banks will not verify funds but will verify if a check is in fact genuine.
7. Periodically check the endorsement on the back of the checks that you send out after your bank returns them and see if the signing party in fact matches the client who placed the claim. Be wary of “pay to the order of John Doe” or any individual for that matter per “Your company name”. Ask yourself … why is my business check being cashed by an individual?
8. If the claim doesn’t pass the smell test, that’s probably because its bogus and no matter how excited you are thinking you just had a great month and you don’t want to lose this client so “lets just remit a portion early so we can get more claims” NEVER let your emotions get the better of you as you will only end up battling the bank for your funds back and you will likely lose.
9. And finally … always question debtor payments in cash. A quick scenario … a client places a $175,000 claim (and there’s more where that came from you are told) but wants a major discount in rate as its more of an accounting issue than recovery as “debtor pays in frequent small payments and its only 2 weeks past due - this has become too difficult to manage”. You open the claim at 10% or less and debtor starts walking in with cash a few weeks later which you apply to the open balance. You then remit to client via wire and this is the easiest collection you have ever had. What you may have failed to realize is that you just assisted a money launderer at the inexpensive price of 10% (or less) of all cash received. What a bargain! That is until the feds call you and then you can re-read this article b/c I will personally send it to you at the courthouse. If it sounds too good to be true, it probably is too good to be true. So ask yourself “Why Me?” when something really spectacular crosses your desk and looks to easy to be legitimate.
ARM Industry Well-Prepared to Collect for IRS
Our guest blog today is from Kimberly A. Mahoney, a corporate development manager with collection law firm Weltman, Weinberg & Reis Co. Kimberly responds to opponents of the IRS privatization program.
I have been following the progress, or considerable lack of it, on the IRS outsourcing issue for the past five years. I have a few comments on recent developments and the opinions expressed by those opposed to the effort.
First, am I the only one who finds it ironic that the IRS itself has been the subject of criticism over lost laptops containing tax payer information? Meanwhile, one of the largest arguments against using private debt collectors has been that we cannot adequately protect data?
Do they not realize that our industry has been scrutinized repeatedly regarding this issue? As a matter of fact we (at least our firm) have been audited over and over regarding the handling of sensitive consumer data by almost every top notch financial institution in the country. We are already held accountable for our ability to protect data. The difference being just that, we are accountable. If we lost laptops containing sensitive consumer data, there is NO WAY, that simply stating that we (via SELF evaluation) could find no "adverse effect" on any consumer would pass muster.
To the effective "neutering" of the private collections agencies due to lack of enforcement methods: Do they forget that the accounts being placed by the IRS are those that, for whatever reason, have yet to be contacted at all by the IRS? They have also not been disputed! If these files were such a priority, then why have they yet to do anything with them? Or to even have an internal process in discussion to fix it? It was not until the Republican Congress decided to revisit the outsourcing of this function, did the union for [the employees of] the Department of the Treasury raise a fuss. It was not until the potential for competition (from those driven by making a profit) became a possibility did they begin to lobby for increasing the IRS budget to accommodate additional agents to handle these previously "low priority" delinquencies.
Many collections agencies and law firms also currently collect funds/taxes on behalf of state governments, state agencies, federal agencies and municipalities, other than the IRS. Collecting federal income taxes would not be much different.
These types of accounts are the types that are highly desirable to collectors (non-disputed/non-worked). We have very sophisticated metrics and call strategies to maximize our recoveries. Please also keep in mind that our communications with debtors/delinquent taxpayers are already highly regulated by the FDCPA/FCRA. Also, although we are not directly subject to such statues as the GLB, Sarbanes Oxley, HIPPA etc., many collections agencies/law firms also adhere to these regulatory standards both as an internal best practice and to comply with the external financial institution audits mentioned above. Also, most of the time, "enforcement efforts" are saved for the very obstinate/hard to collect accounts. They are not the preferred front line method of collection. We would always rather work out an arrangement with a debtor rather than sue and enforce a judgment. Contrary to popular belief, we are not "happy" to litigate with folks.
All things being equal, using private debt collection firms would certainly be a "win/win" situation for all parties involved. The Government (representing the complying taxpayers) would finally collect long over-due taxes (duly owing and non-disputed). Those who DO pay their taxes on time as required would gain some peace of mind knowing that they are not supporting those who choose not to. Well deserving social programs and services would possibly find some desperately needed funding from this "windfall". Many folks would be provided with well paying, respectable jobs.
Best Regards,
From the (single, non-dependent having, taxpaying, young- "upwardly mobile" individual with a ridiculous tax rate that I am happy to pay ~ on time!)
Kimberly A. Mahoney
Where’s All That Tax Refund Money?
We’ve heard from a number of different collection agency executives in the industry that the 2007 tax refund season hasn’t been as lucrative as in years past.
Typically, the first quarter of any given year is a boom time for collectors as indebted consumers get lumps sums of cash from their state and federal tax return refunds and apply them to outstanding debt. Perhaps it’s just a coincidence, but some of the people insideARM has spoken with have commented that those payments are weak this year.
The matter has come up in the news at least once: in its parent company’s earnings conference call, ARM giant WAM noted that “tax refund liquidation in the quarter was not as high as the company is accustomed to seeing,” (“WAM to Reduce Debt Buying in 2008 Over Funding Flap,” April 18).
Just today, I spoke with a collection agency owner on another topic and he said something very similar. A recent thread on the insideARM Discussion Forum also addressed lagging tax refund settlements.
Mike Ginsberg, CEO of ARM advisory firm Kaulkin Ginsberg, blogged a few weeks ago on the impact a sour economy was having on collections.
Is that the answer? Is a bad economy forcing consumers to use tax refunds differently this year? Or are tax refunds just smaller this year?
Are we even hearing this correctly? And if it is true, will the stimulus checks set to go out soon help fill the void?
We’d love to hear the experiences of those in the industry on tax refund payments this year. Please feel free to comment below.
Press Piling on Collectors … In a Good Way
More of this, huh? Weekly business magazine BusinessWeek is running a laudatory article on the debt collection industry on its web site today. Maybe “laudatory” is a strong word … it just isn’t negative, a change for collectors of course.
The article looks at the growth opportunity for the accounts receivable management community in light of a sour economy and strained credit; not exactly breaking any new ground, but definitely a positive mention.
It follows a small string of positive mentions in mainstream media for the account receivables management industry. The New York Times has run two great articles on debt collectors in the past month: A local piece on Buffalo-area collection agencies supplying much-needed jobs to the region and a front page feature on collectors improving their image. USA Today then ran a letter to the editor from NARCA president Bob Markoff which explained the collections business from the industry’s point of view.
All of this positive press is not an accident. Industry trade groups have been engaged in a deliberate campaign to bolster the image of collectors, as insideARM reported this week (“Debt Collection Industry Invests in Capitol Hill Campaign,” April 9). In the article, we mentioned the lobbying efforts of ACA and the public relations push from NARCA, but they’re not the only ones working for the industry.
Gary Wood, past-president of debt buyers’ group DBA International, emailed me yesterday noting that they have also been active on Capitol Hill lobbying for ARM interests. DBA has had a relationship with a Washington-based law firm for more than two years that has taken the group’s case to members of Congress and various relevant government agencies.
While influential trade groups are working on the entire industry’s behalf, I think there is an opportunity for individual collection agencies and debt buyers to make their mark locally.
As the “credit crunch” expands – and the economy contracts – there will be a lot of press concerning consumer credit and past-due bills. ARM firms should take this opportunity to pitch stories to local media about how they are helping consumers during these difficult times. The stories are going to be written anyway, we might as well get our voices in them.
Collection Industry has Duty to Treat Consumers Equitably
Guest Blog: USA Today yesterday ran the following Letter to the Editor from Robert Markoff, president, National Association of Retail Collection Attorneys (NARCA), and a partner with Baker, Milller, Markoff & Krasny in Chicago.
As a young man, the future President Abraham Lincoln suffered financial hardship. At least three judgments were entered against him for non-payment of debts. Lincoln paid the first judgment in installments. For the other debts, the sheriff sold a few of Lincoln's possessions, including his horse and saddle.
Today's turbulent economy is leaving many people unable to pay their debts. Consumers are disturbed when they, like Honest Abe, fall behind. Knowing that one of this country's most highly regarded citizens faced and overcame serious financial problems can provide some perspective in hard times.
If there were no consequences for non-payment of one's obligations, the temptation would be for no one to pay his bills. Debt collection is an important part of our economy. All consumers would be penalized if businesses were unable to recoup losses resulting from bad debt. In 2005, $39.3 billion was repaid, saving the average American household $351 in reduced prices and greater purchasing power.
Nonetheless, just as consumers must act responsibly, so too must collection professionals. Members of the collection industry should never miss the opportunity to do the right thing in helping consumers meet their responsibilities.
The industry need only look back at one of its predecessors when considering its professional conduct. Within a year of the sheriff's sale of Lincoln's possessions, Lincoln became a lawyer whose main court practice involved debts. Honest Abe was a collection attorney.
