Finance

Does FDCPA apply to business debts?

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Many enterprises and third-party businesses tend to collect debts on behalf of a different entity or person. The Fair Debt Collection Practices Act or the FDCPA limits the behavior of outsourced debt collectors. As amended in 2010, the US law restricts the number of times a collector can contact the debtor in one day. In case the FDCPA policy is violated, the debt collection company and individual debt collector can be sued for any damages caused.

How Does the FDCPA work?

The FDCPA does not work for private debtors. For example, if you owe money to the local mechanics’ store, and the owner calls you to collect their amount in due time, that person is not a debt collector by law. The Fair Debt Collection policies only apply to third party collectors, such as agents that work for debt collecting companies. Student loans, credit card bills, mortgages, household are some of the obligations covered by the act.

The Business Debt Agencies

When a business gets stuck with outstanding debt past its due, the initial creditor will try to obtain the amount before sending it for collection. If the same company cannot pay within the 90-120 day time period set by the FDCPA, the creditor has three options: sell the debt to a commercial debt collection agency, sue the company, or assign.

The latter means that the original creditor may include a third party to collect the money on behalf of them, or it can also mean that they have the right to manage and keep the cash if deemed legal.

Numerous commercial debt companies take it upon themselves to track down businesses that fail to pay their amount at the specified time. The organization will attempt to contact the debtor via email or phone, and if they do not get a response, they are most likely to file a lawsuit.

Debt Collection Statistics, AIT Credit Services Inc.

According to the data, a small amount of debt can negatively affect a business. However, the pressure of having to pay back in time during an unprofitable period can be quite tough to handle. The Fair Debt Collection Parties Act protects those businesses with outstanding debt by prohibiting loan collectors from contacting them repeatedly.

However, the FDCPA is not legally relevant to commercial companies where the agents are not subjected to regulation. The Commercial Collection Agency Association or the CCAA abides by high money collection standards, upholding strong ethics. To become an official member of the group, you need to get a license by submitting an application and submitting a bond. Once you obtain the permit, it needs to get renewed every year to ensure its applicability.

The FDCPA Regulations

Since the FDCPA law does not apply to commercial businesses, the collection practices might become more straightforward for the creditors. But like more things in life, it takes more than just a little explanation to register the details of commercial debt accumulation. To help you better understand the financial act’s central policies, let’s work our way through each directive level to come up with a fully understood response.

Federal rules over business debts

The FDCPA might not apply to third parties, but the legislation clearly states that it works on a household, family, and personal debts. This means that the act excludes all the money incurred on behalf of a business organization. No such federal law exists as yet that would apply to third-party efforts on collecting business loans.

State laws on collecting business debts

It depends on your location or region and if the state government has worked on commercial debt collection policies through the law. Many cities have passed the regulation that involves third-party collection agencies to get licensed by the state directly. There is a high chance that the government might need an agency to be bonded simultaneously.

The pre-requisites above might not offer full consumer protection, the same level as the FDCPA, but they do provide considerable entry barriers to the holistic collection realm. That stops many random profit-seekers from setting up collection businesses on a whim.

The reputation is important

Following the amendment by the FDCPA on commercial debt collection is not optional. While people might take their time understanding that, it is essential to note that going above and beyond those regulations to make sure the treatment of customers is done with respect is the best way to conduct a loan collection.

Many debt collection associations judge, rate, and review collection companies on how they plan their work. Still, only the positively renowned organisations will get the chance to work with reputable businesses. Keeping that in mind, a collection agency needs to follow all the rules set by the FDCPA whether or not they apply to the specific loan they are working on. Not only is it the right thing to do, but it also lies in the best interest of long-term business relationships.

Holistically Speaking

The type of debt collection varies from business to business. In the end, all that matters is making a deal for a suitable takeaway from clients, working through a reputable agency, and placing your image on the map. This saves you the time, stress, and aggravation involved in the money collection process.

Make it a point to form a rapport with an excellent commercial debt collection agency so you can keep your focus on significant things, like making people’s lives a bit easier.

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