Using an OCA to Execute Debtor Judgments
Originally published: March 2014
by Alan Steinhart
Senior Vice President, Business Development
Using an outside collection agency (OCA) to execute and enforce debtor judgments is often a better approach than hiring an attorney.
Many credit applications and sales contracts contain a Choice of Venue clause that specifies an agreed upon location for the resolution of disputes. These documents are usually drawn by the creditor/seller, which sets its company's location as the Choice of Venue. This seems to make sense, since any legal action resulting from the buyer’s default will thus be held in a jurisdiction convenient to the creditor, and where the creditor and his attorney have the most experience with the specific commercial laws involved.
When the buyer and/or his assets are located in a different U.S. state or country, however, there often is less practical value of a judgment made in the creditor’s location than it might appear.
The venue for any lawsuit should typically be the location of the debtor. The reason being, if the debtor refuses to pay a judgment voluntarily, it will be necessary to execute the judgment in the jurisdiction where the debtor’s assets are located. This requires "domesticating" the judgment in the debtor's locale – whether another country or another U.S. state (referred to as a sister-state) – which is required before execution and enforcement is possible.
Domesticating U.S. Sister-State Judgments
Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.
This means that a judgment in New York State, for instance, is executable and enforceable in California, but only after it has been “domesticated”. Each state, of course, has its own procedures, requirements and forms for such domestication.
Given the situation regarding venues and the domestication of judgments, here are six reasons it makes more sense to use an agency collecting nationally or internationally – as the case requires – rather than using an attorney directly to execute and enforce judgments.
#1 National OCA firms have affiliate creditor’s rights attorneys in every U.S. jurisdiction.
#2 OCAs certified by the CLLA and utilizing CLLA member attorneys follow a strict code of ethics.
#3 OCAs have access to attorneys that are covered by a bond for the protection for their clients.
#4 The best OCAs actively manage and monitor the efforts of their affiliate attorneys, guaranteeing the creditor gets the best possible service.
#5 Client-attorney privilege remains with the creditor.
#6 Utilizing a collection agency to execute a sister-state judgment can cost less.
With more than thirty years of receivable management industry experience, Al Steinhart’s primary role is to oversee the management of clients and new business development in ABC-Amega’s Domestic and International commercial collection division.
He maintains direct sales responsibilities with key accounts, such as Avaya, and travels widely to facilitate the company's growth. Additionally, Al acts as ABC-Amega’s liaison for a number of industry associations, including FCIB, ICTF, NACM and the Credit Research Foundation.
Steinhart joined ABC-Amega in 1983, and has held various positions in sales and operations. He has remained a consistent driver of strategies focused on maintaining the company's current client base and developing new business. Al holds a Political Science degree from SUNY Fredonia.