September 29, 2010

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Question:

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Hello Ken

    Recently in a group meeting people are talking about credit checking their customers and they have a document that they use or have built this into theirs ... What are your thoughts

Stuart Brisgel

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Answer:

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    Alarm companies, like other businesses, often have a need to check into their customer's credit.  Credit is extended by performing work and waiting to get paid, and by entering into a long term recurring revenue contract and wanting to know if the subscriber is going to be able to pay you. 

    "Alarm Co is authorized at its discretion to check subscriber's credit using any reputable credit reporting agency"

    I believe you have to have a legitimate reason to check someone's credit, and of course doing business or considering doing business, is a sufficient reason.  You can get consent to check credit in the contract or by separate document.

    The next question is what do you do if you are uncomfortable with the subscriber's credit report?  If you haven't done the work yet you can cancel, or seek guarantees from others with better credit.  If you're in the contract then you will have to continue, unless you have a provision such as: "Alarm Co is authorized to terminate this contract without penalty in the event subscriber's credit report is not satisfactory to Alarm Co, in its sole discretion"

    Anyone have better ideas - we're all ears.