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Debt Collection Laws and How They Apply to Businesses That Owe Money.

If you’re a business owner facing debt can be frightening. You must be aware of the laws governing business debt collection. They control the actions of companies that collect debts, and in certain cases, lenders are allowed to do and cannot perform when they seek to collect your debts.

Laws on debt collection for business If you or one of your customers is trying to collect debts from them, they need to comply with state and federal laws on debt collection. Other ethics codes are also in place. These rules will be explained below.

The Commercial Collection Agencies of America (CCAA) Code of Ethics

The Commercial Collection Agencies of America (CCAA) suggests that agencies who collect money adhere to their obligations under the CCAA Code of Ethics. All agencies that belong to the CCAA must conform to this Code, but nothing is binding on non-member organizations to adhere to the same rules.

Essential provisions in the CCAA that collection agencies have to adhere to (and which debtors need to be aware of) are:

  • Collection agencies should place a high value on integrity, fairness, and honesty.
  • They intend to prevent any activities that “would bring reproach on” collections or the CCAA.
  • Collection firms should avoid using corporate names and letterheads that indicate a connection to the federal government or the justice system.
  • They cannot perform the legal duties lawyers be expected to.
  • Collection agencies should avoid making fraudulent statements to debtors or distributing deceptive material.
  • The company must pay attention to the problems of debtors.
  • The collection representative has to validate the debt when a person who is requesting the service.
  • Agents are not allowed to harass creditors in person or via telephone. (Email and social media aren’t explicitly mentioned in the CCAA.)

If the debtor is hiring a lawyer to represent them, The agency has to work with the debtor’s lawyer if the lawyer is not responsive. In that case, agencies may contact the debtor.

CCCA-compliant agencies must not declare that a creditor has filed or is about to start a lawsuit unless the creditor has permitted the filing of the suit.

The agencies should not threaten to notify the debtor’s creditors and financial institutions regarding the debt. Neither should they.

If you think a collection agency has not abided by an ethical code, such as the CCAA Code of Ethics, your lawyer can guide you on how to make a lawsuit against the company.

Did You Know?

The CCAA Code of Ethics is obligatory for all collection companies belonging to CCAA and prevents collection agencies from using specific strategies.

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Consumers’ laws on debt collection

Different laws determine how agencies can recover a debt that a customer owes.

The Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) is an act of the federal government that collection agencies, but not the creditors, must comply with when collecting the amount of credit. The law’s rules state:

Collection agencies can’t contact outside parties during certain hours if a call is made by an agency that collects money before 8 a.m. or after 9 p.m. within the time zone that is being used to call in violation of the FDCPA.

It is possible to ask that collection companies not contact you during work hours. Agents must follow this demand following the FDCPA. The FDCPA doesn’t permit the request of calling not to be directed at your residence.

There is no way to be reached when you’ve appointed an attorney. If you have hired an attorney to represent your interests and collect, the collection agency must not contact you but not your attorney. Your lawyer will explain the agency’s instructions to you while you and your lawyer will take action as necessary.

Family members and friends aren’t at the mercy of many calls. The collection agencies seeking debt repayment from you can call your relatives and friends only once. In addition, they can not contact you or your relatives to find you or reveal they’re seeking payment from you.

Collection agencies must validate your debts. Within 5 days of contact, the collection agency has to state debt verification to ensure that you are legally compliant with FDCPA. The letter must specify the amount of debt that is due and how you’ll be able to pay the debt.

The collection agencies aren’t able to make threats to lawsuits. They can add credit-related debts to your report but are not given the legal authority to initiate lawsuits. They can’t seize your personal belongings or levy a wage garnishment. The debtor may sue you, at which point you and your attorney must be before the court.

Collection agencies are not allowed to send out false data. It’s not uncommon for them to present themselves as if they’re. But the FDCPA prohibits this kind of behavior, which includes sending letters using forged legal letterheads or asserting that the debt is a crime – unlawful.

If you think there’s a problem with the illegal activities of your creditor or the collection agent, consult your attorney. Also, you can make a claim directly to the Federal Trade Commission.

State business debt collection laws

Additionally, to the FDCPA in addition to the FDCPA and the CCAA Code of Ethics, states also have their own rules which creditors have to follow in dealing with customers. But, they usually don’t apply to business.

For example, for instance, it is the California Fair Debt Collection Practices Act (also known as the Rosenthal Act, safeguards against unlawful or misleading practices and the harassment of creditors and collection agencies in California. In contrast to the federal FDCPA, a federal law, the California FDCPA applies to all lenders and not only to collection agencies. But, it does not apply to business-related debts. Therefore, the guidelines don’t apply to obligations incurred by you or your company’s financial situation.

Colorado, Florida, and Illinois have laws that are similar to Illinois, Florida, and Colorado.

According to Washington state laws, collection agencies cannot call third parties. In addition, agencies that collect claims from Washington customers cannot force the debtor to pay additional telephone expenses beyond what they usually charge.

Key Takeaway

The FDCPA, as well as several state laws, determine how consumer debts can be recovered. The law governs what and how often creditors may call consumers to seek repayment of the outstanding debt.

How does a commercial collection agency function

Suppose a debtor thinks that interaction with you is not feasible to recover their debts. They could employ an agency for commercial debt collection. They are specialized in seeking the debts of your business and other B2B creditors while complying with the laws of business debt collection.

If a collection agency is contracted to recover your debt and you are contacted numerous times, you may also receive demands letters. Companies that collect debt for commercial purposes could also call relatives and friends to find you. In addition, they may modify your credit report to show that your account is being repossessed.

The debt collection companies, however, are not able to do much. They can exercise their powers. They can’t take legal action against you or arrest the person who is threatening the person you are. Your lender must employ a lawyer to file a lawsuit against you. In addition, you’ll need to engage an attorney to defend your rights.


Avoid ignoring collection agencies. However, it would help if you disputed debts that are not correct as well as asked for assistance.

The best practices to deal with corporate debt collection

If you are in the process of settling commercial debt and you’re dealing with collection agencies, you should keep this in your mind:

  • Never ignore a collection agency. By doing so, you only increase the situation. Please find a way to settle your debt, whether it’s legal or challenging the debt in any other way.
  • Dispute incorrect debts. It is possible to contest obligations provided you can prove the incorrectness of the debt. The proof could include copies of the invoice, a check sent, a cashed check, and other documents.
  • Make the payment or engage an attorney. If the debt is legal, then make it amount. You should hire an attorney if it’s invalid or you can’t pay the current cost. Lawyers can help create a payment plan, guide you through bankruptcy, work with creditors, and many more.
  • Be aware of the time limit. Sometimes, your debts may be insufficiently old to warrant their validity. Based on the state you reside in and the kind of debt you are owed, it could be due within three or ten years from the date the first time it was imposed on you if you decide that the amount you owe exceeds the time limit and your debtor’s claim has no merit.
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