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February 9, 2021 Collections

How Do Commercial Collections Differ From Individual Collections?

Businesses often have to hire a collection agency when borrowers have not repaid their debt, but finding the right company for the job is not always easy. Business owners can become confused about the process and may initially approach a consumer debt collection agency when they really need a commercial collector. 

When business owners do not understand the differences between individual collections and commercial collections, they have little chance of recovering the debt in an efficient manner. If you are a business owner that is attempting to recover debt from another business, it is essential to know the differences between consumer collections and commercial collections.

Understanding Individual Collections

Individual debt collection companies deal exclusively with collecting debts that are owed by consumers to a business. The most common types of debt consumer collection agencies concern themselves with include personal credit card debt, unpaid loan and mortgage balances, and medical debt.

Consumer debt collections are governed by the Fair Debt Collection Practices Act (FDCPA) which is a lengthy piece of legislation intended to protect consumers against unethical and unfair debt collection practices. Under the FDCPA, debt collectors are prohibited from using threats and harassment when attempting to collect on a debt. The FDCPA also prohibits debt collectors from intentionally deceiving consumers when collecting a debt, such as trying to recover a debt that was never owed by the consumer. These are just a few of the laws included in the FDCPA.

When a consumer debt collection agency is attempting to recover a debt from an individual, they most often use mailed notices. In some cases, they may call a consumer or use email as well to recover the debt.

In the event that a consumer outright refuses to repay a debt, or a consumer debt collection company’s efforts to recover the debt are unsuccessful, the debt collector will likely file a lawsuit against the consumer. Litigation is the last step debt collectors will take when trying to recover a consumer debt, but it is one that is used often because it is often difficult for collectors to recover consumer debt.

Understanding Commercial Collections

Just as consumer debt collection companies attempt to recover debt from individuals exclusively, commercial debt collection agencies focus on recovering debt owed by one business to another. In the majority of cases, these debts do not revolve around loans, but rather debts incurred for products or services that were never paid. Commercial debt collection companies deal with all types of businesses, from small to large, and those encompassing a wide variety of industries.

Unlike individual collections, commercial collection methods are not governed by the FDCPA. However, commercial collections are still subjected to certain laws that must be followed. Commercial collection agencies are still prohibited from using unethical or aggressive tactics, but they have more options than what are available to consumer debt collectors.

While consumer collection agencies typically rely on written communication to recover debt, this is not a step used often by commercial collectors. Commercial collection agencies are more likely to telephone the business that is in debt several times and try to work out a payment plan that works for both the borrower and the business to which they owe money.

Litigation is sometimes used when commercial collection agencies have tried to recover a debt from a business, but it is not as common as when companies try to recover a consumer debt. This is largely because businesses want to maintain the business relationship with the borrower. As such, mediation and other forms of alternative dispute resolution are sometimes attempted before the business will enter litigation. However, sometimes taking the matter to court is the only way a business can recover what they are rightfully owed.

Which Type of Collection Company Should You Use?

It may seem obvious that businesses should use commercial collection agencies when a business owes a debt, and that consumer debt should go through a consumer debt collection company. However, the matter becomes a bit more complex when a business decides to use a collection agency that deals with both consumers and commercial debt.

Businesses are always advised to work with a company that has the sole focus of recovering commercial debt from other businesses. These companies will have specialized debt collectors that have the necessary training and are better able to recover the debt effectively and efficiently.

Our New Jersey Collections Lawyers Can Help Your Business Recover Debt

If you are a business owner that is having trouble recovering commercial debt, contact our Parsippany-Troy Hills collections lawyers at Snellings Law, LLC today. We know how to recover the debt you are rightfully owed and will take whatever legal action is necessary. Call us today at (973) 265-6100 or fill out our online form to schedule a consultation with one of our attorneys and to learn more about how we can help.