As a commercial debt collection agency, one of the most common questions that we field from potential clients is how the federal and state regulations that address debt collection apply to commercial debt collection.
The short answer to that question is that legislation like the Fair Debt Collection Practices Act (FDCPA) does not apply to commercial debts. But like most things in life, it takes a little more than the short version to fully explain the details of commercial debt collection.
To help you better understand how various rules and regulations might impact a commercial debt collection on your behalf, let’s work our way through each level of regulations to come up with a complete response.
Federal Regulations for Commercial Debt Collection
The FDCPA is the federal law that regulates third-party debt collection. However, the legislation specifically states that it applies to “personal, family, and household debts.” This means that it excludes any debts that are incurred on behalf of a business operation.
There are actually no federal laws that apply to third-party efforts to collect on outstanding business debts.
State Regulations for Commercial Debt Collection
Depending on where you are located, there is a good chance that your state has addressed commercial debt collection through some type of legislation.
Many states have passed laws that require any type of third-party collection agency to be licensed by the state. It is also possible that the state might require an agency to be bonded as well.
These requirements might not offer consumer protections on the level of the FDCPA, but they do provide some barrier of entry to the collection industry, which prevents random people from setting up collection businesses on a whim.
Some states, like California, also make a point to extend the rules of the FDCPA to all types of debt collection. If operating in these states, a commercial debt collection agency must be sure to follow all of the rules and regulations.
Reputation Still Matters
While following the laws concerning commercial debt collection is not considered optional, we also like to point out that going above and beyond those regulations to make sure that you treat consumers with respect is always the best way to conduct a collection.
There are a number of debt collection associations that will rate and review collection agencies, but at the end of the day, the most reputable businesses are only going to want to work with the most reputable agencies.
With that in mind, it is absolutely critical for a collection agency to follow all of the rules of the FDCPA whether they apply to the specific debt they are attempting to collect or not. Not only is it the right thing to do, but it is also in the best interest of their long-term business prospects.
No matter what type of debt you are attempting to collect from your clients, having a reputable collection agency working on your behalf often pays for itself many times over by saving you time, stress, and aggravation.
Make a point to set up a relationship with a commercial collection agency and you can take those frustrating debt collections off of your plate so that you can focus on things that are truly important.