3. Questions to Ask an Online Information Broker

If you’re thinking about using an online information broker for skip tracing, here are some questions you should ask, according to Rick Seiboldt, an expert in tracking debtors:

How often do you update your database?

Do I have to pay an online fee? (per minute)

Do I have to pay any additional fees? (Some brokers will give you a list of names; if you pick a name, there MIGHT be additional charges to look at the complete record.)

Do they have a no hit - no charge policy?

Seiboldt recommends staying away from anyone who says they can get bank account information, as there are too many who get this information illegally. There are databases that you have to pay a monthly fee whether you use them or not. If you do use them, remember you are paying a monthly fee and a per search fee, which can get costly if you do a lot of business.

During the course of any business day, countless hours are devoted to the exchange of reference information between various granters of commercial credit. Quite often, those of us exchanging the information are also members of an industry credit group.

We are guided, to some extent, by the commercial laws of the land and credit group bylaws. However, often this legislation is broad and subjective. To a large extent, the quality and content of exactly what is exchanged is a matter of a professional code of ethics–a sense of honor and integrity that forms a bond between us as professionals.

Certainly, we have deep responsibilities to our own companies: to be profitable, to survive and prosper in tough times, and to put our organizations in the best competitive position. However, we also carry around our own personal "shingles" – our reputations as honest providers of information to others in the trade, and our roles as caretakers of the information entrusted to us. These reputations follow us even if we should change employers or industries.

If we should misrepresent credit information for the gain of our own company, we will violate trust. Should someone in our company "leak" shared information, we will bear the responsibility for the outcome. The consequences of improprieties can be dire: possible expulsion from credit groups, lost customer goodwill, even lawsuits.

Here, we will look at several realistic situations involving the exchange of information between trade creditors, or between trade creditors and bankers. As a yardstick, we will also examine how "the experts" look at these situations. We will see from these responses, and our own responses, exactly how seldom we are guided by case law and, therefore, how important the bond of our code of ethics really is. In particular, those who are inexperienced in credit exchange will gather very useful insights. Let’s examine the following sample situations and consider how we would react to the way in which information was handled. Examine each issue from the standpoint of both ethics and legality.

These situations, with sample responses from the survey of experts which forms the text of the presentation, Ethics and Legalities of Credit Interchange, as well as the presenter’s own viewpoints are given below. (As always, readers are encouraged to seek their own legal counsel rather than relying solely on the responses here.)

Situation 1: A banker answered a credit manager’s questions about a depositor freely, but failed to volunteer that the customer was recently the subject of a large tax lien.

Despite the fact that we expect to exchange information freely and openly, this is perfectly okay. The tax lien is public information, which should be available to the credit granter if he has updated his files lately. While our initial reaction might be that the banker withheld something he should have disclosed, he also has a responsibility to his customer to avoid "blurting out" unsolicited negative information for which (we assume) he has no independent confirmation.

Said an experienced creditors’ rights attorney about this issue: "A banker, or any creditor, or reference giver, is only required to answer questions honestly. If no question was asked concerning the tax lien, the banker is correct not to volunteer that information. The banker would have no way to know if the tax lien was disputed or how it may have been resolved, and to give negative information that could be erroneous would be more unethical than to remain silent."

Situation 2: A group interchange member quotes detailed financial information received from a corporate customer with the notation "confidential."

Every survey respondent agreed that this is unethical and probably illegal. We must also consider this: Can we share the fact that we have possession of the information? To protect the customer’s confidence, shouldn’t we also hold private from others that we have been given confidential information? Doing so probably increases the likelihood that the customer will continue to entrust us with such information.

Situation 3: A credit manager can see from a group interchange discussion that a customer is seriously past due with many vendors. The credit manager demands that the customer return equivalent material to cancel the debt, with immediate suit the alternative.

This issue caused a split among our panel of experts. Said one attorney, "This is totally permissible. Much case law, particularly in the Second Circuit Court of Appeals, has held that ‘the dissemination of information concerning the creditworthiness of customers aids sellers in gaining information necessary to protect themselves against fraudulent or insolvent debtors.'" But an experienced credit manager responded, "This is unethical and, based on invoice terms of sale, could be illegal if the invoices are not due for payment. It could be ‘breach of contract.’"

My view is that the "solvency" issue may be a big factor in the decision. Is the customer insolvent according to the Uniform Commercial Code? Therefore, is reclaiming goods (according the reclamation protections of the UCC) a prudent defense mechanism for the creditor, assuming the allowed time for reclamation has not elapsed?

Thanks to Norman Taylor