Regulating Commercial Debt Collection

Collecting debt can be a real challenge for most businesses. The problem with this aspect of business is that it is not highly regulated and there is less oversight when it comes to debt collection. Even though the Fair Debt Collection Practices Act of 1977 is in place, only those debts accumulated through personal, family, or household transactions are covered by the law. Debts that need to be collected by businesses or individuals for commercial purposes are not covered by the Act.

According to the website of Slater Pugh, Ltd LLP, most businesses rely on collection agencies in order to collect unpaid debts. There are no US Federal laws that regulate third-party collection agencies. In most states, these firms are required to be bonded. Likewise, a license is required in order for collection agencies to collect debts of creditors. To be a licensed collector, you need to submit an application for license as well as financial documents and information about them. They are also required to purchase a bond for the protection of the creditors and pay a licensing fee ranging from $50 to $1,000.

Aside from state laws, it is also possible to collect debt through the Commercial Law League of America and the Commercial Collection Agency Association. These two organizations have assumed responsibility for looking after the needs and rights of creditors and their customers in the aspect of business collection.

When choosing a collection agency, it is important to practice due diligence. There are many collection agencies who collects many in an illegal manner or go to the extent of harassing debtors which can have a huge impact on the reputation of your business. It is best to work with members of the Commercial Collection Agency Association which are also certified by the Commercial Law League of America. They can help you find a licensed collection agency.