Debt Collectors and Fraudulent Companies 2 of 6
By Dean Kaplan+
Unfortunately, instances of fraud can be found in almost every industry out there. Protecting your company against fraud is important, and debt collectors may be useful for those times when the fraud has been perpetrated and debt collection is necessary. This is the second article in a six part series of articles on the business of fraud. This article will focus on types of companies which seem to be hardest hit by fraud and red flags of fraudulent potential customers.
Certain types of businesses seem to have a particular appeal to scammers. Below is a list of businesses and product types which seem to attract more fraud than the average:
a. General wholesale merchandise such as home products, health and beauty products, electronics including computers, televisions, stereos, radios, etc.
b. Smaller products that can be easily transported from one location to another, are difficult to trace and are easy to sell.
c. Apparel falling into the low to medium price range.
If your company is selling a product line that falls into the categories preferred by fraudulent businesses, it is imperative to set up and follow strict credit policies at all times. These credit policies must include independent verification of all information gathered from potential new customers, no exceptions, ever. In addition, it is advisable to become a member of a trade group consisting of businesses similar to yours so that comparing and sharing of credit information is possible. Networking about potential customers with other like-minded companies can go a long way toward thwarting fraudulent businesses.
Companies in the business of fraud know that potential creditors will do their homework to be certain of the character of a new customer. Because of this, fraudulent companies make it very difficult for the potential creditor to really know who the owners of the business are. Below are some red flags for creditors to be aware of:
a. A very young owner. Often a fraudulent business will use a front man to conceal the true identity of the owners. A favorite front is the young person because invention of a long detailed business background will not be necessary.
b. An older retired owner. This is another favorite front because the con artist typically finds a retiree with a clear business background who is willing to be the responsible shield for a dishonest enterprise.
c. Employment records which cannot be verified. It should always be easy and straightforward to check the employment records of the company’s principals. Be very wary of principals who list long periods of employment in an obscure foreign company or as a consultant. Be even more cautious if the principal is unwilling to provide references or specific business address information from that past employment.
d. The possible secret sale of your customer with the former owner staying on as if nothing has changed. The new principals may be committing fraudulent acts while the former owner keeps you from noticing anything unusual. The scammer in this case wants the failure of the company to look like it happened due to normal business causes because the chances of a conviction for intent to commit fraud are less.
e. An organizational structure that is complex and confusing, particularly in a new enterprise. Scammers may hide behind this confusion making the credit check process difficult for potential creditors.
If any of these red flags come up during the credit check process, work even harder to find out everything you can about the principals of the business applying for the credit. Take extra care to check the employment history of the principals so that you can confirm their business backgrounds.
When a customer has fraudulently conducted business with your company and owes you money, debt collectors can help you collect the debt. Scammers are very good at hiding their true identities and locations. Professional collection agencies are experts in searching for and discovering these true identities and locations. Commercial collection agencies have vast experience in locating debtors and identifying if assets are available and debt collection possible. State of the art techniques are employed by collection agencies and they know how to negotiate with elusive debtors. They have proven methods of silencing every excuse the debtor makes, and their debt collection success rates are very good because of these methods. Dealing with fraud is always unfortunate, but collection agencies can take some of the sting out when they collect the debt that is owed.
Click here if you are ready to go on to the next article in this six part series Debt Collectors And Fraudulent Companies 3 Of 6.
And be sure to check out the rest of the articles in this series:
- Types of Fraud
- Commonly Scammed Businesses and Fraud Red Flags
- How to Identify A Fraudulent Company
- The Unsolicited Order Scam
- Unmasking Ownership
- Bankruptcy Fraud
The Kaplan Group is a boutique collection agency specializing in large (over $10,000) debt collections due from businesses. Founded in 1991, the company has a stellar reputation (A+ rating with the Better Business Bureau) and is recognized as one of the leading collection agencies for results on large and complex matters.