To Collect Or Not To Collect

On using collection agencies

By Ofer Zur, Ph.D.

Source: Zur, O. (2010). To Collect Or Not To Collect. National Psychologist, July/August, p. 20-21.



In today’s economy and financial difficulties the questions regarding fees and debt collection from clients seem to be more frequent and more relevant. In times of economic crisis, many people who have lost their homes or jobs understandably seek psychotherapy to better cope with stress due to mounting debt and loss.

One of the many obvious outcomes of such economic crisis is that many clients cannot pay their therapists’ fees and end up accumulating debt. Many mental health professionals wonder whether debt collection is the answer for a financially delinquent client. The question does not capture the complexity of most situations where clients fail to pay their therapists’ fees. While the question is not new, its urgency is. As this short article discusses, in many situations, this is not a simple financial or legal matter of one person failing to pay this debt to another. In order to understand these complexities one must explore the relevant professional, relational, clinical, ethical, legal, and unintentional consequences aspects of this issue.

Prevention & Process
One of the most obvious questions regarding clients’ debt is what was the process between therapists and clients that resulted in clients not paying their bills and accumulating debt. In situations when clients have lost their job, health insurance or face foreclosure, allowing their debt to accumulate is generally neither clinically wise nor very caring. Similarly, if clients are already carrying burdensome credit card debt or a mortgage payment, which is beyond their means, letting these kinds of clients accumulate debt in therapy is not what a prudent practitioner should generally do. In situations like this, therapists should be thoughtful and engage the clients in dialogue, considering different options, such as reduced fees or frequency of sessions, providing pro-bono therapy, devising appropriate and ethical bartering arrangements, negotiating a realistic payment plan, terminating treatment, or reframing to a local low-fee mental health community clinic. When therapists are aware of clients’ financial debt load or tendency to accumulate debt they should be thoughtful and careful before becoming one more debtor of such clients.

Preventative Options
If therapists end up being owed by their clients they have a few options they consider. With the aid of peer or expert consultation, a thorough ethical decision-making process and, if possible, discussions with clients, therapists and clients may consider the following options:

  • Therapists and clients may agree on realistic and affordable payment plans.
  • Clients and therapists may negotiate an ethical and appropriate bartering arrangement.
  • Therapists may consider forgiving part of or the whole debt. However, they must be careful when considering forgiving debt as many insurance companies frown upon therapists’ forgiving co-pay or deductibles as it may constitute fraud or violation of the contract. In these situations, therapists must comply with the contract, make good faith efforts to collect the co-payment or deductible and, if allowed, forgive it under extraordinary reasons of hardship.
  • Filing with small claim court or initiating a lawsuit is not-recommended as options for therapists who attempt to recoup clients’ debts.
  • Turning clients’ debt over to a collection agency is also not recommended. If one chooses to pursue this option, it is considered good practice to inform the client at the outset of therapy that the therapist may use a collection service as a last resort if clients do not pay their balance and that the collection agency will receive only basic information, such as the client’s name, contact information and total money owed. Such a disclosure may be included in the initial disclosure statement or Office Policies provided to clients at the beginning of therapy.


One of the few areas of agreement among ethicists, attorneys, and risk management experts has been the idea that using collection agencies is not a good idea for variety of reasons. While employing collection agencies may be a legal way of handling client’s unpaid debt it has also several drawbacks.

Following are some of issues for therapists to consider prior to employing collection agencies:

  • Once therapists turn the debt over to collection agency they have no control over what kind of practices these agencies employ. The news media has intermittently reported disreputable, illegal and harassment practices by the barely regulated industry. They include harassing phone calls at all hours, embarrassing calls to family members and employers, calls by agents impersonating law officers, and all kind of threats. Even if one did find a collection agency that acted responsibly, as John Riolo put it “debt is a commodity. Like mortgages, it can and often is sold to third parties for collection.”
  • Therapists must take into account that employing collection agencies may negatively impact a clients’ credit rating.
  • Therapists must realize that they may not get more than 10% to 30%, if any; of the debt they try to collect. Most of the debt goes uncollected and the rest goes to the collection agency. Therapists should wonder: Is it worth it?
  • Obviously, most clients are likely to feel upset when contacted by the collecting agencies. They, most probably, feel harassed and violated if they are on the receiving end of aggressive collection practices. They often feel betrayed by their former therapists, whom they may have viewed as an ally, confidante, or trusted counselor.
  • Many experts have reported that attempts to collect unpaid bills often lead clients to file complaints with the licensing boards or to file malpractice suits. The charges in such filings do not center on the debt but on supposedly substandard care and/or harm caused by the therapists. Even unfounded and frivolous board complaints can result in therapists being investigated and, at times sanctioned. Obviously the stress of being investigated or being taken to court is enormous, is highly disruptive, and can last for a few years.
  • In our digital era it may take one person to post a scathing-negative review on Yelp or other web sites and to cause significant harm to therapists’ reputation, referrals, and practice in general.

In summary, a thoughtful process of dealing with clients before a significant debt has been accrued can save a lot of grief. When therapists allow debt to accumulate, they must first reflect back on how they got into the situation and then seriously weigh their options prior to turning the debts to collection agencies. They may want to take the loss and learn a lesson prior to learning a lesson after clients file a licensing board complaint, file a lawsuit, or put a damaging review on Yelp.

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