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Who Should Use Commercial Debt (B2B) Collections?

Posted by Credit Management Company on Jan 25, 2022

Business to business debt collection can be hard to understand at first. Check out this guide on who should use commercial debt collections.

Do you run a profitable business driven with low overhead and human capital? Does it seem like everything is going well until the moment you realize some of your outstanding balances are past due? 

Even when you try to send customer debt collection requests, they have fallen on black days. After speaking with colleagues, you were told about the possibility of commercial debt collection agencies taking over. This is known as business-to-business debt, these firms specialize in debt recovery owed by businesses.

This type of debt collection can be hard to understand at first. In this article, we will cover everything you need to know about commercial debt collection so that you can decide if you would like to make use of it. 

How Do Commercial Debt Collection Agencies Work?

It’s been noted that there are trillions of dollars in business debt, as per statistics from the Federal Reserve. That’s a lot of money, and a lot goes unpaid.

This is where the commercial collection agency enters.

These types of agencies are third-party contractors to your business. Agencies work on a contingency basis - they only get paid when the debt has been collected.

However, a commercial collection agency is unlike a consumer collection agency. The end-target is different.

Whereas consumer debt collection pursues the individual debt owed to a business, commercial collections collect from other businesses that have failed to pay their balances. 

B2B Collection FDCPA and Regulations

You might be wondering which restrictions apply to commercial collection firms and agents. Well, consumer collection strategies are closely regulated under the Fair Debt Collection Practices Act, which serves as a standard for removing abuse and shady practices in the collector’s world.

However, the FDCPA does not relate to commercial debt collection. This means that commercial debt collectors might be able to use practices in their collection that are otherwise excluded and restricted with the FDCPA.

Keep in mind, this does not mean that B2B collection is unregulated. There are rules in place but they arise from state regulation and law. Some states require these collectors to be bonded and licensed when performing their work activities in the state. In essence, this means the agency must substantiate financial disclosures, submit applications, pay their licensing fees, and provide proof of bonding.

Also, the Commercial Collection Agency Association certifies members after they pass through a very intricate application process. While this association is not under the wing of the government and it does not have governing authority over non-members, it still has a great reputation in the industry. Not to mention, registered members under this organization are more likely to be reputable, authentic, and transparent with their process.

How Long Can Debts Be Pursued?

It’s common to think that debts dissipate over several years. This comes from the understanding that personal creditor problems disappear from reports after seven years. However, a statute of limitations does not exist for commercial debt. 

Commercial debt collectors can try to collect balances until the debt is paid or the company is no longer operational. For instance, Texas has a 4 year statute of limitations on personal debts. Thus, debt collectors cannot pursue a balance after 4 years have passed. However, even though this rule does apply to sole proprietors who have a business/personal debt, it does not apply to corporations, LLPs, or LLCs.

Hence, hiring a commercial debt collection agency can be a great way to add pressure - especially to stubborn businesses.

Appropriate Commercial Debt Recovery for You

Get in touch with us now to learn more about how we can expedite your accounts receivables. 

Topics: debt collection