Collector - August 2018 - 14
Making Good Choices
How to apply payment when a consumer has multiple accounts.
By Anne Rosso May
ebt collection specialists have a
simple goal: to help the consumer
resolve the account. However,
thanks to rising college tuition rates, auto
debt and out-of-pocket health care costs,
consumers often have multiple accounts
in collection. And when they send in a
single payment without indicating which
account they want the money applied to,
you may wonder: Which account should
get the payment?
The answer to that question is governed
by federal and state law. The Fair Debt
Collection Practices Act directs collectors
to apply a payment to the account specified
by consumers. This direction may not be
physically attached to the payment, but think
carefully about any conversations you had
with the consumer. Did the person tell you to
use the payment for a specific account? You
might need to refer to your notes to see if
the consumer mentioned this. If so, you are
obligated to comply with their wishes, even
if you think the payment would be more
beneficial applied to another account.
Absent either verbal or written directions,
however, you are free to apply the payment
to any debt not disputed by the consumer
(following established company policy, of
Generally, if the debt includes interest, you
are permitted to apply payment first to the
interest, and then to the principal if the debt
is undisputed. Some states have specific rules
about this, however.
For example, in Alabama, when you are
dealing with a judgment for child or spousal
support, or for medical support of a child
or spouse, any partial payment should be
applied first to the principal of the debt and
the remaining balance, if any, should be
applied to the interest.
South Dakota has strict rules for how
payments should be applied absent
consumer direction. In these situations,
you can apply it to any of the consumer's
accounts unless the consumer has multiple
accounts with roughly equal balances-if so,
you must apply it to each account in equal
If you receive a payment from a consumer
but can't find an account associated with
that person, look to applicable state law for
guidance on what to do with the money.
Under Colorado law, for instance, if you
receive a consumer payment but can't
identify the client account on whose behalf
the payment is made, you must return the
entire payment to the consumer within 30
days after the end of the month in which the
payment was received.
If consumers send in an overpayment on a
debt, you should ask them how they want the
excess applied. If you can't get that direction,
you'll need to refund the overpaid amount.
If the refund is returned as undeliverable,
your agency may submit the overpaid
amount to the state's unclaimed property
fund. Often, state law dictates how to process
overpayments or refunds.
Anne Rosso May is editor of Collector