How to Handle Commercial Debt Collection
What is Commercial Debt?
Commercial debt is any debt owed by a commercial venture or business. Unlike consumer debt, commercial debt is used to fund business expenses, asset acquisition and improvements. It is common for businesses to accumulate a great deal of commercial debt when first starting out. Rather than declare bankruptcy, commercial debt counseling, commercial debt consolidation, and commercial debt settlement are alternatives for businesses struggling with debt that is past due. If your business is struggling to repay commercial debt, the attorneys at McCarthy Law can help you restructure your business debts. By negotiating with your creditors to eliminate a portion of your debt, we can help you to work out a manageable repayment plan.
How Commercial Debt Collection Agencies Work
When a business has an outstanding debt and payment is past due, the original creditor will attempt to obtain payment before sending the account to collections. Typically, if a business does not pay within 90-120 days, the creditor has three options: assign, sue, or sell the debt to a commercial debt collection agency. Assign, meaning the creditor may have an agreement with a third party and that the third party has the right to collect on behalf of the original creditor, or it can mean that they have the right to actually keep and collect payment on the debt versus just collect .
Commercial debt collection agencies that buy debts owed by businesses to creditors do so at a fraction of the amount actually owed and then take it upon themselves to track down the business and collect the debt. Because debt collection agencies only make money if the debtor actually pays, they are notoriously aggressive. The agency will attempt to contact the debtor through phone and mail. If the agency does not receive payment after repeated attempts at contacting the debtor, it may file a lawsuit. If a commercial debt collector is pursuing your business, the lawyers at McCarthy Law can help you settle the debt for a fraction of the balance allegedly owed.
The Standards Commercial Debt Collection Agencies Must Abide By
The Fair Debt Collection Practices Act (FDCPA) protects consumers with outstanding debts by prohibiting debt collectors from harassing debtors. Unfortunately, the FDCPA does not apply to commercial debt collectors. This is not to say, however, that the activities of commercial debt collection agents are not subject to regulation. The Commercial Collection Agency Association (CCAA) is responsible for supervising the activities of commercial debt collectors. In order to become a certified member of the CCAA, firms must abide by high standards of practice and uphold strong ethics. In addition, many states have licensing requirements for commercial collection firms. In order to obtain a license, the firm must submit an application, purchase a bond, and pay a licensing fee. The licenses must be renewed either every year or every other year. Arizona is one such state that has enacted licensing statutes – pursuant to these statutes the government periodically conducts audits of collection firms licensed in the state. The attorneys at McCarthy Law are familiar with commercial debt collection laws and can easily recognize violations of the law.
Reducing Your Commercial Debt
Because your original creditor makes only pennies on the dollar if it chooses to sell your debt to a collection agency, they are often willing to negotiate a reduced payment amount before sending your debt to the collection pipeline. Note, however, that no creditor is legally obligated to agree to negotiate a reduced amount. Nevertheless, it is often beneficial for creditors to do so.
Negotiations often begin when the debtor (or debtor’s attorney) makes an offer that reflects what he/she can realistically afford to pay. Obviously, a creditor is more likely to accept settlement offers that are close to the original amount owed. However, creditors have been known to accept only a small fraction of the outstanding loan. Of course, negotiations can be tricky and consequently it is often advisable to seek professional representation in the matter. Our debt settlement attorneys have years of experience working with creditors. Because we represent debtors and go against creditors every day, we know which creditors are likely to negotiate and what amount a debt should settle for. We also have a good idea of whether a particular creditor is likely to sue or not. Chances are, we’ve dealt with your creditor before.
If your business is struggling with commercial debt call the lawyers at McCarthy Law today. We will work with your creditors to workout a manageable repayment plan that is satisfactory for all. Free consultation with an attorney.
Types of Businesses We Help Protect Against Commercial Debt Collection
Businesses come in all shapes and sizes, each with unique challenges and needs. From small businesses to large corporations, every company can face the daunting task of dealing with debt collection agencies. Our attorneys at McCarthy Law are well-versed in a wide variety of commercial debt defense strategies, making them capable of addressing nearly any organization’s specific requirements. Whether your company is dealing with a single complaint or a series of judgments, we have the experience to help protect your business.
- Small Businesses: Often the backbone of our economy, small businesses can be especially vulnerable to aggressive debt collection efforts.
- Startups: New ventures facing financial hurdles while trying to establish themselves.
- Medium-Sized Companies: Growing businesses that might encounter larger-scale debt issues as they expand.
- Large Corporations: Established companies dealing with complex debt structures and multiple creditors.
- Non-Profits: Organizations dedicated to causes that need protection from undue financial strain.
- Professional Services Firms: Legal, medical, consulting firms, and others that require specialized defense strategies.
- Retailers: Businesses in the retail sector face unique challenges related to inventory and supply chain debts.
- Manufacturers: Companies producing goods and needing assistance with large-scale debt matters.
How to Respond to Commercial Debt Collection Agencies
When commercial debt collection agencies come calling, the first steps you take can significantly impact the outcome. Start by verifying the debt — make sure it’s legitimate and the amount owed is accurate. Engaging in dialogue with the agency is crucial, as it may lead to a favorable solution without escalating to court. Knowing your rights as a business owner is essential; this knowledge empowers you to navigate the legal process confidently. The goal is to find a resolution that allows your business to continue operating smoothly while addressing the debt in question.
What Are Some Prohibited Practices in Commercial Debt Collection?
These practices are illegal because they exploit and intimidate businesses, undermining their ability to operate effectively. Legal frameworks exist to protect companies from these tactics, ensuring that the collection effort remains within ethical bounds.
Harassment
Debt collectors cannot engage in harassment, which includes persistent calling, threats, or abusive language.
False and Misleading Representations
They are prohibited from making false claims about the debt, such as inflating the amount owed or implying they have more authority than they do.
Unfair Practices
Debt collectors cannot use unfair methods, like charging unauthorized fees or using deceptive forms and documents.
How to Identify Illegal Commercial Debt Collection Activities
Illegal commercial debt collection activities can severely impact your business. To handle these effectively, start by documenting everything. Keep detailed records of all communications and any questionable actions taken by the debt collector. If the collection activities continue, cease direct communication with the debt collector and seek legal aid. An attorney specializing in debt collection defense can provide guidance on how to proceed and help file a formal complaint if necessary. Knowing your rights and having proper documentation can significantly strengthen your position in defending against illegal practices.
McCarthy Law Can Help
Facing commercial debt collection can be overwhelming, but you don’t have to go through it alone. McCarthy Law is here to support your business with our debt collection defense. We can also help you if you’re dealing with second mortgages, small business loans, or other financial challenges. Speak to us today, and let us help defend your business against commercial debt collection and secure your company’s future.