Who has authority to offer a settlement on the call?

The account owner holds the authority

A settlement is a decision to accept less than the full balance. The federal banking agencies’ credit card guidance (2003) describes it from the creditor’s side: the creditor forgives part of what is owed, and the borrower pays the rest in a lump sum or over several months. That decision belongs to whoever owns the account.

For an agency working a client’s accounts, that is the client. insideARM’s editor made the point in 2011 after a client sued its agency in a Texas court, alleging the agency had accepted a settlement on a commercial account that the client had already rejected (insideARM, 2011). His advice: agencies are extensions of their clients, so run every settlement offer past the client before making it, large balance or small. The article reports the claim, not its outcome.

The owner’s goals shape the limits. A 2010 insideARM survey report found agencies and debt buyers using settlements in full differently. It said debt buyers, who own their accounts and often plan collections years ahead, feel less pressure to resolve accounts quickly than agencies do, and one agency respondent said lower settlement thresholds are usually set by the client.

Some clients delegate nothing. In a PDCflow recap of an AccountsRecovery.net webinar (2020), one panellist, Megan Bryant of Credit Collection Partners, said many creditor clients do not allow agencies to negotiate for them, and suggested taking the consumer’s offer to the client anyway, since the client may accept it or come back with a counteroffer.

Writing the authority down

In our view a floor should turn each client’s authority into a plain written table that collectors can see on the call, sometimes called a settlement grid:

• What the collector may approve alone. The lowest settlement the client allows, by balance band or account age, and whether it must be paid in one payment or may be spread.
• What goes to a supervisor. Offers inside the client’s limits but outside the collector’s own.
• What goes to the client. Anything outside the client’s limits, with how the request is sent and how long an answer usually takes.
• Which version applies. Clients change their limits; keep each version dated, so an audit can show which table applied on the day of the call.

A written table means no collector has to guess what the client allows, which is the failure alleged in the insideARM case. It also makes offers consistent: two consumers with the same kind of account hear the same terms.

What the collector may and may not say

A collector may offer what the table allows, explain the terms plainly, and take any counteroffer to approval. A collector may not:

• Promise what has not been approved. A settlement that still needs the client’s approval is not agreed, and the consumer should hear that.
• Invent a deadline. If an offer has an expiry date, it must be real.
• Advise on what follows. In our view, questions about credit reports or taxes get the written terms and, where the agency’s policy allows, a pointer to an adviser, not a collector’s guess.

Regulation F’s rule on false or misleading representations forbids any false, deceptive or misleading representation or means in collecting a debt, including falsely representing the character, amount or legal status of a debt, and threatening action that cannot legally be taken or is not intended.

A consumer who says "I don’t owe this" is raising a possible dispute, which goes to the agency’s dispute procedure, not to a discount (handling objections). A consumer in real hardship may fit a programme better than a settlement (hardship or a payment plan).

Put it in writing

The CFPB tells consumers to get a payment plan and the collector’s promises in writing before making a payment, and notes those promises may include stopping collection and forgiving the rest of the debt once the plan is complete. So the floor should be ready to send the agreed terms before the first payment: the amount, the dates, what happens to the remaining balance, and what happens if a payment is missed. Your compliance team and counsel decide the wording and how settlements are offered; BestPair does not provide legal or compliance advice.

Sources

• OCC Bulletin 2003-1, Account Management and Loss Allowance Guidance for Credit Card Lending: interagency guidance from the federal banking regulators, including how creditors treat settlements.
• Be Sure to Get Client Approval Before Settling Collection Accounts: insideARM, July 2011, on a lawsuit over an unapproved settlement.
• SIF Strategies Differ Between Collection Agencies and Debt Buyers: insideARM, February 2010, from its industry confidence survey.
• Payment negotiation tips for past due accounts: PDCflow, a payments vendor, recapping an AccountsRecovery.net webinar with three agency leaders.
• How do I negotiate a settlement with a debt collector?: the CFPB’s advice to consumers.
• Regulation F, false, deceptive or misleading representations: the CFPB’s text.