What is Commercial Debt Collection?
Whether it is initial financing, a capital infusion, or outstanding accounts receivable, many companies take on debt. According to data from the Federal Reserve Bank of St. Louis, there is well over $1 trillion in outstanding commercial debt in the United States.
Commercial debt collection can be especially complicated. For businesses collecting on debt, a well-tailored strategy is a must. In this article, our Los Angeles debt collection lawyer provides a comprehensive overview of the key things to know about commercial debt collection.
Commercial debt collection is the process of taking action with the intent to recover an unpaid debt that is owed by a business or organization. A company may try to collect on a debt directly, or it may consult with a third party, such as a Los Angeles debt collection attorney.
Collection may involve various methods—from sending reminders to making phone calls to drafting and sending demand letters. In some cases, legal action may be needed against the debtor. The ultimate goal is to retrieve the outstanding amount owed and ensure that the debtor fulfills their financial obligations.
Three Key Differences Between Commercial Debt Collection and Consumer Debt Collection
Commercial debt collection and consumer debt collection are distinct. A business trying to collect on a commercial financial obligation will need a different approach/strategy. Here are three issues that you should be aware of when attempting to collect on a commercial debt in California:
- Commercial Collection Requires Specialized Strategies: Collection typically involves larger debt amounts. Further, the parties will typically have a more complex relationship and/or more complicated payment structures. To effectively collect a commercial debt, specialized strategies are required. You may need to communicate with an entire team of people on the debtor’s side.
- Not Regulated By FDCPA: The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates debt collection practices for consumer debt. However, commercial collection is not covered under this law. Instead, commercial collection is governed by state laws and industry regulations. It is a difference that has very important implications.
- Delinquent Commercial Debt Can Still Be Reported to Credit Agencies: When consumers fail to pay their debts, it can impact their credit scores and ability to obtain credit in the future. The same is true for businesses that fail to pay their commercial debts. While consumer collection is more heavily regulated and subject to strict reporting requirements, delinquent commercial debts can still be reported to credit agencies and impact a business’s credit rating.
At the Law Offices of Andrew Ritholz, our California collection lawyer has the skills and experience to handle all types of commercial collection cases. Contact us today to set up your fully confidential, no-obligation consultation. With offices in Monrovia and Pasadena, we provide commercial debt collection services in Los Angeles County and throughout the region in Southern California.