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What Are The Debt Collection Laws, And How Do They Apply To Businesses That Owe Money?



Learn how to respond to a commercial collection agency. How to deal with a collection agency. Federal law, state law, and industry ethics govern the collection process.

You may receive frequent calls from commercial debt collectors, who will modify your credit score and even contact friends and relatives.

Commercial debts have a statute of limitation. You should not ignore the collection agencies. However, you must dispute any incorrect debts and seek legal help.

The article below is for owners of small businesses whose companies have debts.

Being in debt as a small business owner is frightening. You must be familiar with the laws governing business debt collections. They control the actions that creditors and collection agencies can take to collect debts that you owe.

Businesses are subject to debt collection laws.

When a client or vendor tries to collect debts from you, the debt collection law must be followed by both federal and state laws. There are also additional ethics codes. These rules will be explained below.

Commercial Collection Agencies of America Code of Ethics

Commercial Collection Agencies of America recommends collection agencies adhere to the CCAA Code of Ethics. Members of the CCAA are bound to follow these ethics, but non-members agencies are not.

  • The CCAA contains several key provisions that all collection agencies (and debtors) should be aware of.
  • Fairness, honesty, and politeness are the most important values for collection agencies.
  • The CCAA and the collection industry are not to be criticized for their actions.
  • Avoid using company names and letterheads that imply a connection to the federal or judicial authorities.
  • The duties of an attorney are not to be performed by them.
  • Debtors should not be misled by collection firms or deceptive material.
  • It is essential to give full consideration to the problems of debtors.
  • The collection representative must validate the debt if a creditor asks for it.

The CCAA prohibits agencies from harassing debtors by telephone or in person. The CCAA does not mention email or social media.

The agency will work closely with the attorney hired by the debtor until the lawyer is no longer responsive. In that case, agencies may contact the debtor.

CCCA-abiding agents must never falsely claim that a creditor is suing or intends to sue unless they have the creditor’s permission.

The agencies must refrain from contacting the creditors’ vendors or financial institutions.

Your attorney can guide you in filing a complaint if you feel a collection agency violated the CCAA Code of Ethics.

Did you Know?

The CCAA Code of Ethics applies to all collection agencies that are members of the CCAA. It prohibits certain practices and applies to agencies of any size.

Editor notes: Are you seeking the best collection agency to help your business? Please fill out this form to receive a call from our vendors about your requirements.

Consumer debt collection laws

Different laws govern the way agencies collect a debt that a customer owes.

Fair Debt Collection Practices Act

It is a federal law that collection agencies must adhere to when they collect a debt. The provisions of the law state:

  • The collection agencies are not allowed to call you outside of specific times. Calls received by a collection agent before 8 am or 9 pm in the zone they are calling violate the FDCPA.
  • Request that the collection agency not contact you while at work. The FDCPA requires that agencies comply with your request. However, the FDCPA doesn’t allow you to ask that no calls be placed to your house.
  • If a lawyer represents you, then collection agencies cannot contact you. When a lawyer represents you, collection agencies can only reach your lawyer. Your lawyer will inform you what the collection agency has to say so that you can respond.
  • You can’t harass your family or friends. If collection agencies are pursuing repayment from you, they can only contact your family and friends once. Collection agencies may only call your family and friends to find you and not disclose that they’re pursuing repayment of debts from you.
  • Collection agencies must validate your debts. To remain FDCPA compliant, collection agencies must send you an official letter of validation of your debts within five days of contacting you. The letter should state the amount of debt you have and your repayment options.
  • The collection agencies are not allowed to threaten legal action. Collection agencies are not allowed to sue. They can only add your debts to the credit report. The collection agency cannot garnish or seize wages, nor can they take your property. You and your attorney must appear in court if a debtor sues you.
  • Collection agencies cannot send false information. Collection agencies are not uncommon to pretend to be something they are not. The FDCPA, however, makes such behavior illegal. This may include sending documents with forged letterheads or saying you owe the government money.
  • Speak to an attorney if you suspect that your creditor, or the collection agency they use, is engaging in illegal behavior. The Federal Trade Commission can be contacted directly if you wish to file a complaint.

State business debt collection laws

State regulations govern how creditors deal with consumers. They are in addition to FDCPA, CCAA Code of Ethics, and state laws. These laws are not always applicable to business.

For example, if you reside in California, California Fair Debt Collection Practices Act (also known as Rosenthal Act) protects you against deceptive or unfair practices, harassment, and other forms of abuse from creditors, collection agencies, and others. The California FDCPA differs from the federal FDCPA in that it applies to creditors and collection agencies. However, it does not cover debts for business purposes, so its rules do not apply to you if the debt is for your own business.

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

Washington law prohibits collection agencies from contacting third parties in any way. Also, Washington collection agencies cannot charge debtors additional fees for calling them.

The Key Takeaway

How consumer debt is collected depends on the FDCPA and several state laws. Laws govern when and how creditors may contact consumers to collect outstanding debt.

What is a Commercial Debt Collection Agency?

A commercial debt collection company may be hired by a creditor who feels that communicating with you to recover their debts is not a viable option. They specialize in collecting debts from B2B creditors and your business.

You may receive several calls from a collection agency to recover a debt. Demand letters are also sent. Commercial debt collection agencies can also call your family and friends to locate you. They can also alter your credit reports to reflect that you are in a collection.

However, debt collection agencies have only limited power. A debt collection agency cannot sue, arrest, or threaten you. You must retain an attorney to defend against a lawsuit, while your creditor must hire one to bring the suit.


Do not ignore the collection agencies but dispute any incorrect debts, and do not hesitate to ask for help.

Business debt collection: Best practices

Consider these things if you are dealing with collection agents and owe a business debt.

Never ignore a collection agency. This will only worsen your current situation. If your debt is valid, devise a payment plan or challenge it.

Dispute incorrect debts. You may contest the obligations if you have ample evidence that they are wrong. You can provide proof in copies, such as invoices, checks sent, checks cashed, etc.

Hire an attorney or pay the bill. Pay the bill if it is valid. You can hire an attorney if the debt is invalid or you cannot afford to pay it. You can use a lawyer to negotiate with your creditors, set up a repayment plan, and guide you through bankruptcy.

Be aware of the limitations period. Your debts might be old enough not to be valid in some instances. Your debt could expire between three and ten years after you were first harmed. Your creditor will lose their case if you decide the debt has passed its statute of limitation.


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Realm Scans: Navigating the Uncharted Territories of Digital Discovery



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Harry Clam

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