Collection Agency Success Against Small Business Owners

News And Col­lec­tion Agency Regulations

Col­lec­tion Agency Suc­cess Against Small Busi­ness Owners

By Dean Kaplan

As a col­lec­tion agency, we often have debtors attempt to avoid deal­ing with us by try­ing to hide behind rights pro­vided by the Fair Debt Col­lec­tion Prac­tices Act (FDCPA). The FDCPA applies to con­sumer debt but not to busi­ness to busi­ness debt col­lec­tion. Suc­cess­ful com­mer­cial debt col­lec­tors need to know which rules apply to their col­lec­tion activ­i­ties and which laws are not applicable.

Most debt col­lec­tion is of the con­sumer vari­ety, known in the indus­try as ‘retail’ col­lec­tions, for debt relat­ing to such things as credit card, tele­phone and med­ical bills. When a con­sumer fails to pay a debt to a cred­i­tor or a bank, even­tu­ally the cred­i­tor will stop attempt­ing to make the con­sumer pay, and they may assign or sell the right to col­lect the amount owed to a col­lec­tion agency act­ing in a third party capacity.

If the cred­i­tor or bank sells the right to col­lect the debt, it is usu­ally for only a small per­cent­age of what is owed. For exam­ple, if the amount owed is $1000, they may sell the right to col­lect the debt to the third party agency for only $10 to $100. There­fore, any amount the agency is able to col­lect above and beyond the $10 to $100 they spent to buy the right will be to their benefit.

Debt col­lec­tions is like climb­ing mountains

Some­times when a col­lec­tion agency con­tacts a busi­ness or busi­ness owner to try to col­lect a debt, the per­son will be famil­iar with laws that apply to retail col­lec­tions. For exam­ple, a con­sumer may send an agency a ‘val­i­da­tion of debt’ let­ter request­ing the agency prove the consumer’s legal oblig­a­tion to pay the debt. Once the agency receives the val­i­da­tion of debt let­ter, the FDCPA says they must pro­vide the debt val­i­da­tion within 30 days from their receipt of the request letter.

The agency is required to pro­vide the fol­low­ing con­sumer debt val­i­da­tion infor­ma­tion: an account­ing of what the debt is for; a break­down of how the debt amount was cal­cu­lated; photo copies of any signed agree­ments oblig­at­ing pay­ment of the debt; photo copies or other proof of any judg­ment (if applic­a­ble); proof that the fed­eral and state statutes of lim­i­ta­tions that apply to the debt have not yet expired; iden­tity of the orig­i­nal cred­i­tor; proof that the agency is licensed in that state; and the agency’s license num­bers and reg­is­tered agent.

In the case of a con­sumer, if the agency does not respond in writ­ing within the required 30 day win­dow, the agency is required to remove all ref­er­ences to the account and com­pletely delete the debt from the consumer’s credit reports. Also, the agency must pro­vide proof of the requests for credit file dele­tion that were mailed to the three major credit bureaus.

If, after review­ing the val­i­da­tion doc­u­ments, the con­sumer real­izes that the debt is owed, then the con­sumer is legally required to pay off the debt. At this point, it is time for the col­lec­tion agency to nego­ti­ate a resolution.

The FDCPA does not apply to com­mer­cial col­lec­tions. A rep­utable com­mer­cial col­lec­tion agency will not start on a claim unless they already have appro­pri­ate evi­dence of the under­ly­ing debt from their client. If the busi­ness debtor requests val­i­da­tion of the debt it helps to promptly pro­vide the rel­e­vant infor­ma­tion. This gives the col­lec­tor cred­i­bil­ity, keeps the pres­sure on the debtor, and main­tains momen­tum for the col­lec­tion process.

The Kaplan Group does only com­mer­cial col­lec­tions, so the FDCPA laws do not apply. It is not uncom­mon that the own­ers of small busi­nesses who owe our clients money will be famil­iar with the FDCPA. Our col­lec­tors are versed in the FDCPA laws so they can respond with con­fi­dence and author­ity to these busi­ness own­ers who try to hide behind laws that apply only to con­sumer debt. This is one more tac­tic that sep­a­rates our col­lec­tion process from other agen­cies and results in our out­stand­ing suc­cess rate.

The Kaplan Group is a bou­tique col­lec­tion agency spe­cial­iz­ing in large (over $10,000) debt col­lec­tions due from busi­nesses. Founded in 1991, the com­pany has a stel­lar rep­u­ta­tion (A+ rat­ing with the Bet­ter Busi­ness Bureau) and is rec­og­nized as one of the lead­ing col­lec­tion agen­cies for results on large and com­plex mat­ters.

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