When negotiating a settlement with your adversary, be sure the representative you are dealing with is authorized to negotiate on behalf of their client. While this may seem like a somewhat obvious point, sometimes it may be unclear who is authorized to negotiate settlements on behalf of your adversary.
For example, say you or your client are served with a lawsuit from an unpaid debt and you reach out to the attorney that filed suit against you or your client. Nobody answers the phone so you leave a message. You receive a callback but the person calling you is not from the firm that filed the suit, but rather is from a collection agency that claims they have authority to negotiate on behalf of the creditor. What should you do?
Check Who to Negotiate Settlements With
First, before discussing anything with this individual, tell the person you need written confirmation from the law firm that filed suit that the collection agency is authorized to negotiate on behalf of the creditor. Once you receive this, you know that any settlement negotiated with the collection agency is valid.
Negotiating with the collection agency without written confirmation of their authority could be catastrophic. Any settlement agreed upon and then paid by your client could be negated by the law firm that filed suit. You or your client could submit whatever settlement payment negotiated with the collection agency and then the law firm could turn around say that the agency was not authorized to make the settlement in the first place. You or your client could be left to negotiate a new settlement agreement for an additional payment amount, and worst of all, your client could then come after you for possible malpractice for having to pay an additional amount.
Second, make sure that any settlement agreement is signed by either the parties themselves or by the attorneys since the attorneys were the ones that filed suit. Under Rule 2104 of the New York Civil Practice Law and Rules:
An agreement between parties or their attorneys relating to any matter in an action, other than one made
between counsel in open court, is not binding upon a party unless it is in a writing signed by him or his attorney.
The signature of the creditor’s collection agent would not bind the creditor to the agreement unless a power of attorney was separately executed by the creditor granting the collection agency the power to sign on the creditor’s behalf. Unless a power of attorney is executed, the signed settlement agreement must be signed by either the parties themselves or their attorneys.
Need assistance negotiating a debt collection matter? Contact Frank, Frank, Goldstein and Nager for a consultation. We have the experience that pays.