To Collect Or Not To Collect:
On using collection agencies
By Ofer Zur, Ph.D.
Source: Zur, O. (2010). To Collect Or
Not To Collect. National Psychologist,
July/August, p. 20-21.
This article is part of an online
course on Fees in
Therapy for CE credits.
In today's economy and financial difficulties the questions
regarding fees and debt collection from clients seem to be more frequent
and more relevant. In times of economic crisis, many people who have lost
their homes or jobs understandably seek psychotherapy to better cope with
stress due to mounting debt and loss.
One of the many obvious outcomes of such economic crisis is
that many clients cannot pay their therapists' fees and end up
accumulating debt. Many mental health professionals wonder whether debt
collection is the answer for a financially delinquent client. The
question does not capture the complexity of most situations where clients
fail to pay their therapists' fees. While the question is not new, its
urgency is. As this short article discusses, in many situations, this is
not a simple financial or legal matter of one person failing to pay this
debt to another. In order to understand these complexities one must
explore the relevant professional, relational, clinical, ethical, legal,
and unintentional consequences aspects of this issue.
Prevention & Process
One of the most obvious questions regarding clients' debt is what
was the process between therapists and clients that resulted in clients
not paying their bills and accumulating debt. In situations when clients
have lost their job, health insurance or face foreclosure, allowing their
debt to accumulate is generally neither clinically wise nor very caring.
Similarly, if clients are already carrying burdensome credit card debt or
a mortgage payment, which is beyond their means, letting these kinds of
clients accumulate debt in therapy is not what a prudent practitioner
should generally do. In situations like this, therapists should be
thoughtful and engage the clients in dialogue, considering different
options, such as reduced fees or frequency of sessions, providing pro-
bono therapy, devising appropriate and ethical bartering arrangements,
negotiating a realistic payment plan, terminating treatment, or reframing
to a local low-fee mental health community clinic. When therapists are
aware of clients' financial debt load or tendency to accumulate debt they
should be thoughtful and careful before becoming one more debtor of such
If therapists end up being owed by their clients they have a few
options they consider. With the aid of peer or expert consultation, a
thorough ethical decision-making process and, if possible, discussions
with clients, therapists and clients may consider the following
- Therapists and clients may agree on realistic and
affordable payment plans.
- Clients and therapists may negotiate an
ethical and appropriate bartering arrangement.
- Therapists may consider forgiving part
of or the whole debt. However, they must be careful when considering
forgiving debt as many insurance companies frown upon therapists'
forgiving co-pay or deductibles as it may constitute fraud or violation
of the contract. In these situations, therapists must comply with the
contract, make good faith efforts to collect the co-payment or deductible
and, if allowed, forgive it under extraordinary reasons of hardship.
- Filing with small claim court or
initiating a lawsuit is not-recommended as options for therapists who
attempt to recoup clients' debts.
- Turning clients' debt over to a
collection agency is also not recommended. If one chooses to pursue this
option, it is considered good practice to inform the client at the outset
of therapy that the therapist may use a collection service as a last
resort if clients do not pay their balance and that the collection agency
will receive only basic information, such as the client's name, contact
information and total money owed. Such a disclosure may be included in
the initial disclosure statement or Office Policies provided to clients
at the beginning of therapy.
One of the few areas of agreement among ethicists,
attorneys, and risk management experts has been the idea that using
collection agencies is not a good idea for variety of reasons. While
employing collection agencies may be a legal way of handling client's
unpaid debt it has also several drawbacks.
Following are some of issues for therapists to consider
prior to employing collection agencies:
- Once therapists turn the debt over to collection agency
they have no control over what kind of practices these agencies
employ. The news media has intermittently reported disreputable, illegal
and harassment practices by the barely regulated industry. They include
harassing phone calls at all hours, embarrassing calls to family members
and employers, calls by agents impersonating law officers, and all kind
of threats. Even if one did find a collection agency that acted
responsibly, as John Riolo put it "debt is a commodity. Like mortgages,
it can and often is sold to third parties for collection."
- Therapists must take into account that
employing collection agencies may negatively impact a clients' credit
- Therapists must realize that they may not get
more than 10% to 30%, if any; of the debt they try to collect. Most of
the debt goes uncollected and the rest goes to the collection agency.
Therapists should wonder: Is it worth it?
- Obviously, most clients are likely to feel
upset when contacted by the collecting agencies. They, most probably,
feel harassed and violated if they are on the receiving end of aggressive
collection practices. They often feel betrayed by their former
therapists, whom they may have viewed as an ally, confidante, or trusted
- Many experts have reported that attempts to
collect unpaid bills often lead clients to file complaints with the
licensing boards or to file malpractice suits. The charges in such
filings do not center on the debt but on supposedly substandard care
and/or harm caused by the therapists. Even unfounded and frivolous board
complaints can result in therapists being investigated and, at times
sanctioned. Obviously the stress of being investigated or being taken to
court is enormous, is highly disruptive, and can last for a few years.
- In our digital era it may take one person to
post a scathing-negative review on Yelp or other web sites and to cause
significant harm to therapists' reputation, referrals, and practice in
In summary, a thoughtful process of dealing with clients
before a significant debt has been accrued can save a lot of grief. When
therapists allow debt to accumulate, they must first reflect back on how
they got into the situation and then seriously weigh their options prior
to turning the debts to collection agencies. They may want to take the
loss and learn a lesson prior to learning a lesson after clients file a
licensing board complaint, file a lawsuit, or put a damaging review on