Mediating a debt collection claim can be a successful way to reach an agreement to pay. Mediation can be voluntary, where both parties agree to participate, or due to a clause in the agreement that mandates mediation before proceeding to arbitration or litigation. However, there are issues that may arise during the mediation process that can forestall settlement discussions thereby impacting the process and possible resolution of the claim.
The mediation process is the same regardless of whether it’s necessitated by a clause in your contract, you agreed to do so, or it’s required by a court order. Becoming familiar with the possible issues in advance will allow you to anticipate and prepare a strategy to overcome the objections and roadblocks.
Agreeing to Mediation
Mediation is a process by which the parties willingly engage in a session or conference for the purpose of resolving an outstanding dispute. The parties typically consent to the appointment of a mediator for the session.
If successful, mediation offers the creditor and delinquent payer an opportunity to come to “a meeting of the minds” about payment of the claim. If unsuccessful, there will not be a resolution one way or the other. Mediation is not possible without the cooperation of all parties.
If the creditor wishes to mediate the claim but the debtor does not wish to, or vice versa, mediation is not possible. One side can not proceed on their own.
Mediation Issues
Possible issues that may forestall mediation efforts are the circumstances of the debtor and the underlying facts that brought the matter to mediation in the first place. For instance, if the prime dispute is not based on whether the defendant owes the amount demanded by the creditor, but rather on the debtor’s financial circumstances, then the matter usually will involve less acrimony and will primarily focus on a payment arrangement the debtor can feasibly afford.
However, if the debtor disputes the actual debt itself and the mediation session is more of a debate about the underlying facts, then the mediation session can become more confrontational.
Typically in situations like this, the mediator will break the parties and their counsel into separate rooms, either virtually or physically, and then the mediator will try to see whether they can bridge a gap between the parties to resolve the matter.
Another factor that can hold up or slow progress is the stubbornness of the debtor or their representative. Recently, our office had a mediation where the debtor, despite being provided with overwhelming documentation that clearly demonstrated the amount owed to the creditor, refused to agree to pay.
Normally, prior to mediation, the mediator will try to obtain as many underlying facts as possible with a pre-mediation statement from each side with supporting documentation. This will enable the mediator to have the full picture of the matter so they can present as an independent objective voice to a stubborn debtor.
If the parties come to terms, usually the attorneys for both sides will hammer out a settlement agreement with the agreed-upon terms and the mediator will mark the matter closed.
What Happens If a Claim Is Not Resolved in Mediation
Despite best efforts, there are times when a claim is not resolved during the mediation process.
When that happens, the underlying agreement between the parties will determine what the next steps are.
For many of our clients in the accounting field, their agreement calls for mediation first and then arbitration. For others, mediation must occur before litigation, or the agreement is silent and so the parties litigate. For those in litigation who agreed to mediate based upon court order or on their own, the parties, if unsuccessful, will return to the litigation process.
If you have a debt collection matter you wish to resolve, whether through mediation or otherwise, contact FFGN for a consultation.
