What Are Fair Collection Practices?

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The FDCPA generally does not apply to MCA loans

Many small business owners have heard of the Fair Debt Collection Practices Act (FDCPA), and assume it will cover them in the even a past due invoice needs to be sent to collections. This is not the case.

Though Congress enacted the Fair Debt Collection Practices Act in 1977 and added it to the Consumer Credit Protection Act in 1978, it actually defines “consumers” and “debt” as specifically referring to personal, family or household transactions. This means that debts owed by businesses or by individuals for business purposes (commercial debts) are not subject to the FDCPA.  In fact, there are no federal laws, that regulate third-party commercial (business-to-business) debt collection or provide guidelines for the conduct of commercial debt collectors.

 So, if the FDCPA does not apply to business debt collection by third parties, how are those collection agencies regulated?

State Regulatory Bodies and Statutes

In addition to non-governing bodies, each state has its own statutes and regulatory agencies concerned with the collection of commercial debts. Under the United States Code (28 U.S.Code §547), overseeing commercial collection agencies is one of the primary duties that fall to State Attorneys General. In some areas, requirements vary depending on the size of both the business and the debt, or whether it is an individual business attempting to collect from a company or corporation, as opposed to a commercial collections agency.  Even more, these laws can vary depending on the industry or region the business is located.

As these laws do vary depending on where a borrower resides, commercial collection must be done very carefully and deliberately, with knowledge of all applicable factors and regulations to avoid any legal issues, setbacks, and financial consequences. Some typical tactics used that can violate the law include the following:

  • Use obscene, profane, or abusive language
  • Making calls repeatedly and at unreasonable hours in an attempt to harass the borrower.
  • Making false claims when calling such as jail threats.
  • Using an false name or alias, even to collect their own debts
  • Claim to be a law enforcement agency or suggest that it is connected with the federal, state, or local government
  • Falsely represent the amount you owe
  • Falsely claim to be an attorney or that a communication is from an attorney
  • Threaten to take action that isn’t intended or can’t be taken (i.e jail) or falsely claim you’ve committed a crime
  • Send you a document that looks like it’s from a court or attorney or part of a legal process if it is not
  • Claim to be employed by a credit bureau, unless the collection agency and the credit bureau are the same company.

Commercial Collection Member Organizations

To support each other in best practices and the dissemination of valuable tools across the industry, agencies have banded together in a number of trade organizations. As non-governmental bodies, commercial collection member organizations have no jurisdiction over non-members, but they do help to establish and maintain ethical practices and high standards for the commercial collection industry.

  1. Association of Credit and Collection Professionals (Website)
    • Knowledge-based resource for success in the credit and collection industry.
    • This association brings collection agencies, law firms, and other members together for the overall betterment of the industry.
  2. National Association of Subrogation Professionals (Website)
    • This organization is specifically for subrogation and provides training, educational webinars and podcasts to propel the subrogation industry forward.
  3. American Medical Billing Association (Website)
    • Provides information and education for the medical billing industry and the regulatory bodies that govern it.
  4. Healthcare Financial Management Association (Website)
    • The nation’s top organization for healthcare finance leaders
    • This association identifies gaps in America’s healthcare system and advises how it can improve overall.

What Are Fair Collection Practices?

The FDCPA generally does not apply to MCA loans

Many small business owners have heard of the Fair Debt Collection Practices Act (FDCPA), and assume it will cover them in the even a past due invoice needs to be sent to collections. This is not the case.

Though Congress enacted the Fair Debt Collection Practices Act in 1977 and added it to the Consumer Credit Protection Act in 1978, it actually defines “consumers” and “debt” as specifically referring to personal, family or household transactions. This means that debts owed by businesses or by individuals for business purposes (commercial debts) are not subject to the FDCPA.  In fact, there are no federal laws, that regulate third-party commercial (business-to-business) debt collection or provide guidelines for the conduct of commercial debt collectors.

 So, if the FDCPA does not apply to business debt collection by third parties, how are those collection agencies regulated?

State Regulatory Bodies and Statutes

In addition to non-governing bodies, each state has its own statutes and regulatory agencies concerned with the collection of commercial debts. Under the United States Code (28 U.S.Code §547), overseeing commercial collection agencies is one of the primary duties that fall to State Attorneys General. In some areas, requirements vary depending on the size of both the business and the debt, or whether it is an individual business attempting to collect from a company or corporation, as opposed to a commercial collections agency.  Even more, these laws can vary depending on the industry or region the business is located.

As these laws do vary depending on where a borrower resides, commercial collection must be done very carefully and deliberately, with knowledge of all applicable factors and regulations to avoid any legal issues, setbacks, and financial consequences. Some typical tactics used that can violate the law include the following:

  • Use obscene, profane, or abusive language
  • Making calls repeatedly and at unreasonable hours in an attempt to harass the borrower.
  • Making false claims when calling such as jail threats.
  • Using an false name or alias, even to collect their own debts
  • Claim to be a law enforcement agency or suggest that it is connected with the federal, state, or local government
  • Falsely represent the amount you owe
  • Falsely claim to be an attorney or that a communication is from an attorney
  • Threaten to take action that isn’t intended or can’t be taken (i.e jail) or falsely claim you’ve committed a crime
  • Send you a document that looks like it’s from a court or attorney or part of a legal process if it is not
  • Claim to be employed by a credit bureau, unless the collection agency and the credit bureau are the same company.

Commercial Collection Member Organizations

To support each other in best practices and the dissemination of valuable tools across the industry, agencies have banded together in a number of trade organizations. As non-governmental bodies, commercial collection member organizations have no jurisdiction over non-members, but they do help to establish and maintain ethical practices and high standards for the commercial collection industry.

  1. Association of Credit and Collection Professionals (Website)
    • Knowledge-based resource for success in the credit and collection industry.
    • This association brings collection agencies, law firms, and other members together for the overall betterment of the industry.
  2. National Association of Subrogation Professionals (Website)
    • This organization is specifically for subrogation and provides training, educational webinars and podcasts to propel the subrogation industry forward.
  3. American Medical Billing Association (Website)
    • Provides information and education for the medical billing industry and the regulatory bodies that govern it.
  4. Healthcare Financial Management Association (Website)
    • The nation’s top organization for healthcare finance leaders
    • This association identifies gaps in America’s healthcare system and advises how it can improve overall.
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