Ken,

It is with great pleasure that we read your emails. We feel that they are a great asset and forum for the alarm dealers. Many of your articles deal with contacts and the enforcement of those contracts. However, we feel that we just got burned by a local attorney. Here is the situation. Client wants a new alarm system in a store she just opened up. We go out sign contract proposals, get down payment, install the system, all is fine. Client makes payment for 6 months on a five year contract. She calls us very pleased with our work and wants us to install a system in her home. Same thing proposals, and contracts signed, system installed and then all payments stopped. She stops paying on the business account and she doesn't pay anything on the residential account. After three letters and numerous unanswered phone calls we send her to collections. The collection agency now adds their cut to the balance owed on the account. (usually around 20%) She is still answering the business phone, however she is stalling the agency (I will send it out next week; I'm short of cash; etc) The collection agency recommends legal action and supplies a list of attorney that they use in the area in talking with the attorney they state that they will pursue her for a fee of $ 250. Now the balance on the contract owed was somewhere in the neighborhood of $ 3K. We cut a check to the attorney, and figure ok just a matter of time. We have to call the attorney 6 times over the course of one year. We get excuses, " Oh she is still answering the phone, We are on top of it, These things take time" Finally, we find out that she has sold her house and moved the store. (Just down the block). We give this info to the attorney and he states that he recommends we go after her for a judgment. Another check goes out for $500 to pay for court fees and the sheriff to serve her with papers. Another 10 months goes by and the attorney just sent us a letter stating that the judgment has been docketed in Superior Court in NJ. So in all we are out $3,750. and have a piece of paper stating we have a judgment. What would your recommendation be to alarm dealers when an account is about to go to collections? Most of these accounts are for between 1K and 2K. Most alarm dealers make sure they have all the ducks in a row, only to find out that the client has just stopped paying. Collection agencies and some attorneys don't even want to know about the account because the sum of money is not there. Then there are the flat rate attorneys and collection agencies that take your money and give you back a piece of paper. End result, the client just ducked out on the bill and we are out the additional money to try to collect a legal debt. Do you have any suggestions on collection procedures? Pursuing legal breach of contracts? Any information would be greatly appreciated.

Thomas Shields

 

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Answer:

I note you are using a proposal. Make sure it's nothing more than a form that lists what you are doing and a price. It should state that it's subject to execution of your standard contract. There should be no place for the subscriber to sign or agree; that is for the contract itself. The next problem is that you used a collection agency. You should develop a relationship with an attorney, probably a young energetic one, who will be grateful for your work and apply himself enough to learn alarm industry law, at least the collection end. My office has perhaps the largest alarm collection legal department in the country, but we limit our practice to New York, so I can't help you. When you deal with any attorney you should keep on top of your matter, and the attorney. Write or email for a status report every few months and insist on a response. "things take time" is not an answer. Require a response that tells you exactly where the case is. Also, insist that the case be started; you don't need letter and phone calls. You've already made enough calls. Find a lawyer who will handle the case on contingency so he has an interest in bringing it to conclusion. Below is an article I wrote for Security Dealer that is posted on my web site with the other Articles. I hope you find it helpful.

 

Collection Policy Ideas

Business has not yet turned for the better and keeping an eye on your receivables is as important as ever. Additionally by the time this article reaches print there won't be much time until the Christmas holiday season comes and goes. If you have been in business any length of time you know that marginally solvent business often hang on through end of December and then close. That could mean that bills, like the alarm bill, stop getting paid just about the time you are reading this Security Dealer article. Be vigilant. Check your receivables now and those in default warrant your attention. Creditors who act fast and furious are the ones who get paid first, and sometimes they are the only ones that get paid at all. Here are some perhaps obvious ideas that you should implement regarding your collection practices:

1. The process starts with knowing the full and correct name of your subscriber; the full corporate or partnership name. [the correct name belongs on the contract -- which you must have with every subscriber].

2. Be certain to get the title of the person who signs on behalf of a non person entity, such as a corporation.

3. Confirm the name of your subscriber by checking a posted license, sales tax notice, or corporate filing receipts if you can get to see them. Many subscribers will have licenses posted in the premises that you can easily look at.

4. Make a copy of the checks you receive from your subscribers, especially if the bank account is a new one. Retain the copy with your subscriber's records.

5. Try and get your subscribers tax id number. In fact the new contracts call for that information so that you can fill out the UCC form for your security interest.

6. Retain records of service requests and calls.

7. Obtain records from the central station to confirm that the alarm system was tested and working when installed and get periodic test signal confirmation and retain those records in your subscriber's file.

8. Be mindful of your subscriber's payment practice history. In other words, if the customer typically pays within a particular time frame then you need to be alerted to a failure to pay within that period. You need to contact the subscriber to ascertain why payment is not being made in the customary manner. If you do not receive a satisfactory answer then that is the time to refer the subscriber to "collection." Each subscriber therefore establishes its own schedule based on past payment history. One subscriber may be fine running 4-6 months in arrears, and another may cause you reason for concern if payment is not received within 15 days.

9. Remember to keep matters on a professional level. Do not get into personality conflict with your subscriber over late payment of default.

10. Refer the matter to a lawyer familiar with alarm collection practice; avoid collection agencies and your relatives.