A Conversation With ... Douglas S. Evans

Tell us about your firm.
It was formed in 1990. Partner Brent Green and I split off from a firm – called Martin & Evans – that did essentially what we do. We do creditors’ rights law, which is essentially commercial and consumer collections, commercial litigation and creditor bankruptcy work. We’ve got a staff of six, with just us two attorneys. We’ve been larger, but the economic downturn’s been hard on the collection business. Debtors are obviously having a hard time. We depend on people being able to pay to make money, because a lot of our cases are contingent. If we don’t collect anything, we don’t get a fee.

How has the collections business changed during your career?
Credit card collection business has kind of gone by the wayside, because a lot of (that debt) is purchased by debt buyers. We don’t represent debt buyers. We refuse to represent them, because we don’t think their practices are good. … They buy big bulk amounts of charged-off credit card debt – generally it’s credit card debt, but it can be anything – and they then hire firms … to file suit on those. … I’ve probably done as many involuntary bankruptcies as anybody in the state. I used to do them all the time, but I don’t do them so much anymore. But when you get as many as 50 cases against one commercial debtor, that just becomes unmanageable (and) bankruptcy makes more sense sometimes. The debt buying has been a huge change, as well as the commercial collection business. The number of companies doing that has dropped dramatically.

What kinds of companies comprise your client base?
We represent several local banks, for their consumer stuff, mainly. … We don’t normally do foreclosure work. We represent several large local commercial businesses that extend credit – lumber yards, automotive parts, personnel-type businesses. We also are members of the Commercial Law League of America, and through that connection we get Fortune 1,000 companies. … We depend mainly on local clients now, although we get a lot of out-of-state referrals from attorneys, and some commercial collection agency work.

How willing are your creditor clients to work with struggling debtors?
Particularly in this economy, creditors are more sensitive to the debtors’ ability to pay. And I think our clients, for the most part, have been moderately reasonable in the past, even when times were good, in trying to work with debtors. That’s been our firm philosophy. I don’t think you can get anywhere treating people poorly. That’s not going to motivate them to pay.

What steps can business owners take to improve their collections?
There are two ways. There’s underwriting, and just like in insurance, you need to underwrite the people you’re extending credit to, by getting credit applications and information from them, and maybe personal guarantees if the balance is significant. Then, you need to be on top of the aging of your accounts receivable. If somebody hasn’t paid or given you a mighty good reason why they haven’t paid in about 90 days, you need to be doing something because cases’ collectibility drops like a rock in 60 to 90 days.

What’s your role in those processes?
We can help them with their underwriting, by helping with credit applications and agreements and guarantees. Plus, we’ve got a pretty big database of people who are known problems. If one of our regular clients calls, we can tell them whether we’ve had experience with someone. We can give them advice on what they should be doing internally to try and collect. … Particularly in a commercial-type business relationship, your prospective customer should be willing to give you a credit application. In that, you can have them agree to pay a higher interest rate (and) your attorneys’ fees if you have to sue them. And if it’s enough money that it’s an issue, you can require them to personally guarantee the debt of the company. Extending credit to a small LLC or corporation without a personal guarantee is risky. … It’s a real problem in Missouri with LLCs. The state does not require them to disclose a managing member. They have to have a registered agent, and an organizer has to be listed, but if that’s an attorney, that puts up a roadblock.