Law firms tasked with collecting debts from our clients effectively function as an extension of the organization’s collection apparatus. These legal professionals handle substantial monetary transactions on behalf of the organization. Consequently, it is imperative for the organization to oversee and ensure the prompt and complete transfer of these funds from the clients to the organization, minimizing any unnecessary delays.
Given this context, it is essential to establish and maintain rigorous oversight regarding the flow of funds. This includes the transfer from debtor clients to the lawyers and subsequently from the lawyers to the organization. Such oversight is key to safeguarding the organization’s financial interests and ensuring efficiency in our collection processes.
The handling required by the lawyer of the funds received from the organization’s debtors
The lawyer – who directly receives funds in trust for the organization from the debtor himself (in a personal meeting, in vouchers, checks in the mail, credit cards, bank transfers) or through an enforcement process – will issue receipts to the debtor against receiving the funds and deposit the money received into a designated trust account that he will open for the organization.
Trust account management
We will ask the lawyer to open an escrow account for the organization to ensure complete transparency and a continuous or orderly transfer of funds.
Here are the rules for managing the trust account (of the lawyer) designated for the organization:
- The lawyer commits to the organization to act as follows: the trust account will be for the benefit of the organization only, the account will not have a debit balance, and any transfer of funds will be for the benefit of the organization only.
- Receipts received by the lawyer from any source regarding the organization’s clients will be deposited into the trust account on the same day.
- Once a day, all receipts from the trust account will be transferred to the organization’s account.
- The lawyer will allow the organization to inspect or control this account through authorized representatives on its behalf, including external auditors, and will also allow the account to be viewed via the Internet, all at the request of the organization.
- Unidentified payments received into an escrow account will be immediately transferred to the organization, and efforts will be made to locate the customer.
- Deposits that originated by mistake and were transferred to the organization will be returned to the lawyer’s office after an inspection by the concerned people in the organization and their approval.
- The organization will perform ongoing control over these financial activities. Once a month, the lawyer will forward a file of all the receipts received in his office for the benefit of the organization. The organization will make an adjustment between the total receipts above and the total receipts received by the organization.
- The lawyers receive two types of payments from the clients: cash payments in all payment methods and deferred payments (repayment plans) in all payment methods. Here are the rules of conduct for each of the two types of payments:
- Immediate payments by any means of payment (cash, check for immediate payment, credit card with one payment and/or bank transfer) – the lawyer will create a daily file detailing all the receipts received from the clients. At the end of the working day, a comparison will be made between the lawyer’s file and the actual transfer amount.
- Payments through deferred payment methods (such as deferred checks, bank direct debits, and credit card payment transactions): The lawyer will deliver to the organization daily the list of deferred receipts so that the organization can monitor its payment.
In addition, the organization can allow the customer to pay his debt at the organization’s offices. In this case, a digital or manual report will be sent to the lawyer, and the organization will periodically review the fees due to the law firm for this collection.
The required organizational handling of receipts from customers received through the law firms
The receipts transferred to the organization from the lawyer firms daily must be transferred in an orderly manner, including a breakdown of the amount of the fund, the various expenses (court fees, tracing and delivery, foreclosures, interest, etc.) and legal fees due to the law firm.
In large organizations, the receipts transferred from the lawyers to the organization are recorded in automated systems, and this also includes issuing invoices for the various components and controlling the completeness of the receipts up to the level of closing a case and automatically updating the customer status.
Control reports – receipts from the lawyers:
- Quality report of the receipts transferred from law firms; the purpose is to check for errors in the lawyer’s reporting report – does what the law firm reports correspond to the amounts collected from the debtors and correspond to what was actually transferred to the organization? Also, the control is intended to ensure that there are no errors in the report. The remittance report – that there is a complete matching to the receipts received/transferred, and there are no errors in the calculations of the distribution of the collected amounts between the law firm and the organization.