When it comes to debt collection, litigation is rarely the answer.
In fact, it should always be a last resort, the “nuclear option.”
Not only does litigation cost considerably more in the way of time and money, it cannibalizes the relationship with the customer (debtor)…there’s no way to rekindle the flames of commerce after you’ve gone to court.
But most importantly, nothing in the way of litigation is ever guaranteed (except court fees). It doesn’t matter how heavily the odds are stacked in the creditors’ favor, there’s always a chance things go terribly awry.
Unfortunately, most lawyers mistakenly view litigation as the simple solution.
Why?—because litigation keeps the world black and white—file a motion, go to court, and obtain a decision, while collecting legal fees along the way.
On the surface it looks clean and simple but, trust me, nothing that involves the court is ever clean and simple.
How do I know?—from 30 years of experience as an attorney and businessman.
The ideal solution is the one skips the courthouse by bringing the debtor and the creditor to mutually agreeable terms.
Though it sounds difficult, bringing two opposing parties together is less of an obstacle course than you might imagine. Case in point, here’s how we collected $20K for a debtor on behalf of our client and preserved their $100K working relationship.
Our client is in the business of stopping cybercrime.
They offer a popular, subscription-based fraud detection services to online retailers throughout the United States.
The subscription based service operates on a simple premise—for $X dollars a month, a customer can use the fraud-detection service for X number of transactions. If a customer goes over the monthly transaction limit, the fraud-detection service still functions, but an overage fee applies.
A particular online retailer had been using our client’s services for more than a year, and the working relationship was a good one—the retailer received high-quality fraud-detection tools, our client received close to $100K in annual revenue.
Not a bad partnership by any standard.
At one point during the relationship the retailer exceeded their transaction limit and, over a period of time, the overage fees piled up.
When the amount owed hit $20K, our client—after numerous requests to have the overage fees paid —demanded payment in-full. The retailer (now debtor) refused, claiming they had never been made aware of the overage policy.
By the time the client hired Collection Law Group to resolve the matter, the two parties were decidedly deadlocked.
Pivoting from Stalemate to Success
Anytime Collection Law Group is brought into a debtor versus creditor dispute, our first course of action is to weigh all the elements in the equation:
On the one hand, there’s $20K owed from party to another. On the other hand, there’s a $100K+ working relationship to guard.
Although the client authorized litigation immediately (and they were well within their right to do so), our organization suggested prudence—yes, the $20K is duly owed, but not at a net loss of $80K on the year.
Instead of filling a summons and complaint to get the outstanding sum paid, our team reached out to the debtor to talk.
A willingness to genuinely communicate with the debtor is an integral component of the disarming process—it gives them an opportunity to voice their position in an open forum, and it gives our team an opportunity to explain our affinity for amicable collection and preferred avoidance of litigation.
By creating a forum where the interests of both parties were voiced in a healthy, non-combative way, we were able to facilitate a mutually beneficial conclusion to the dispute—the creditor would provide 10,000 free transaction clicks the debtor could use if they like, and the debtor would cut a check for the full $20K owed immediately.
No court dates. No notices to appear. No additional litigation contingency fees. No risk of walking away with a loss.
But if the money was legitimately owed, why offer 10,000 free clicks? How is that a win?
That’s a question we hear often and it’s the same one our client initially asked.
The answer is simple:
We want the $20K, but we also want to keep the $100K relationship alive—by extending an olive branch in the form of 10,000 clicks, we can secure the money and look like “the good guys.”
Litigation is a naturally hostile action and, had we pushed for it, salvaging any future working relationship would have been impossible.
By avoiding it, our client not only walked away with the money owed, but they kept the potential for a profitable working relationship alive and kicking.
It’s a big-picture win that everyone involved can feel happy about—and it’s how the collection process should work.
Click here to learn more about our approach and why this software company chose The Collection Law Group