Differences Between Commercial & Consumer Debt Collection

debt-collection-differencesThe history of debt collection may go as far back as the invention of money. In all that time, debt collection has been essentially unchanged. You borrow money from a creditor with the promise of paying is back within a certain time period. If that promise is not fulfilled, someone will come knocking at your door.

Today, however, there are many laws covering debt collection practices, protecting debtors and creditors alike. Many of these laws are different, depending on whether the debt collection concerns a consumer debt or a commercial debt. What is the difference?

Consumer Debt Collection

Consumer debt collection involves collection activities between a business, which is the creditor, and a consumer, who is the debtor. This kind of debt collection is more strictly governed than its counterpart.

To begin with, there are state laws controlling debt collection. In Pennsylvania, for example, collection agencies, collectors and debt buyers can operate without licenses in the state. Businesses do not need to be licensed to collect a debt, as long as that company is not doing business within the state.

On the other hand, to ensure the privacy of consumer debtors is still protected, there is also the Fair Debt Collection Practices Act (FDCPA). It has been codified and subsequently amended to watch out for and prevent debt collectors’ abusive practices. It is also designed to provide consumers with a venue to air their disputes, have penalties enacted on distressing collectors, and to provide validation of accurate debt information.

FDCPA scrutinizes the collection activities of consumer debt collection agencies. The Act ensures that debt collection agencies don’t use abusive and deceptive tactics toward consumer debtors.

It is well known that the one of the primary advantages to hiring a credit collection company is their extensive knowledge of the laws that pertain to your case. Collecting debts on your own, while staying within the laws, can be a daunting task. This is especially true when dealing with consumer debt collection.

Commercial Debt Collection

Commercial debt collection is also called business-to-business debt collection. It involves debt payment from one business to another. Here, it is simply assumed that businesses are sophisticated and disciplined enough to comprehend their own rights and do their financial duties. Thus, commercial debt collection is much less controlled.

FDCPA does not apply to commercial debt recovery. This allows agencies to take a totally different approach to each claim.

The secret here boils down to the skills of the debt collector. Consumer debt collectors have different skills compared to commercial debt collectors. Not all of those who start out from consumer debt collection are able to adapt to commercial debt collection. This is because commercial collection agencies are highly specialized.

Collectors have to maintain a delicate balance between recovering money from their client’s debtor while still trying to maintain good relationships between the client and their customer. However, there are agencies that handle collections both from individuals and from businesses.

Which Is Easier To Collect?

There are pros and cons to collecting each type of debt. Consumer debt involves compacted laws and regulations, while commercial debt collection may require specialty skills or an effort to maintain a relationship with the client. Either way, debt collection can be extremely complicated. Anyone attempting to collect debts can generally benefit from the help of an experienced collection firm.

By | 2017-02-12T14:41:11+00:00 June 13th, 2013|Blog, Debt|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present