5 Differences Between Personal Debt Collections and Commercial Debt Collections
In movies and pop culture debt collectors are almost always portrayed as the bad guy. That’s in part because a lot of people have had really bad experiences with personal debt collection, known in the collection industry as “retail debt collection.”
If another business owes you money portrayals of debt collectors in pop culture, or your own experiences, may have you concerned about hiring someone to help you take care of the debt owed you. That’s why it’s important to understand the difference between personal debt collection and commercial debt collection.
The Fair Debt Collections Practices Act (FDCPA)
The FDCPA creates strict guidelines on how retail collections are performed and what can be said by debt collectors. These are the rules that prevent debt collectors from doing things like calling people at 7:00 a.m. or telling your coworkers that you owe money. The FDCPA does not apply to commercial collections, allowing commercial debt collection agencies to take a more custom approach to collections. This custom approach is why the success rate of commercial collection agencies varies so widely.
In retail debt collection the business is rarely concerned with maintaining a relationship with the former client. By the time a personal debt has been turned over to a collection agent, the relationship between the original business and the debtor has been severed. In fact, the debt collector may have purchased the debt from the original owner. This is where some of the stereotypes of debt collectors using strong-arm tactics come from. However, a professional commercial debt collector understands that even though a client may owe you money, you may still need to maintain a good relationship with that client.
Many personal debts accrue because of unforeseen circumstances such as job loss or a health crisis. This can make assessing a potential risk difficult for a professional. However, a lot of corporate debt accrues because a company is poorly financed or a bad credit risk. A lot of commercial collection debt could be avoided by running a simple credit check on clients before accepting work.
Because personal debt collection and corporate debt collection are so different, there are different organizations that monitor debt collection agencies. If you are considering hiring a corporate debt collection agency, check to see if the agency is a member of the International Association of Commercial Collectors (IACC). If you are considering hiring a retail debt collection agency, make sure it is a member of the Association of Credit Collection Professionals International (ACA). As a specialist in commercial collections, The Kaplan Group has been a member of the IACC since our founding in 1991.
Bankruptcy laws are different for individuals and companies. If you fear that the company or person who owes you money may declare bankruptcy it’s important to hire a collection agency that fully understands the laws pertaining to both individual and corporate bankruptcy.
If you, or your friends or family, have had a negative experience with personal debt collectors it’s understandable that you might be wary of hiring a commercial collection agent. No one wants to feel like the bad guy chasing down the hero of the story. But it’s important to remember that retail debt collection and corporate debt collection are very separate activities. You owe it to your business to hire a reputable corporate debt collector.
The Kaplan Group only works on commercial collections and specializes in large claims. If you are owed money let us use our experience to create a customized approach for you.
About The Author:
Dean Kaplan is Principal at The Kaplan Group. Dean's expertise is widely recognized in the debt collection industry. His advice has been published in a number of industry newsletters such as Credit Today and InsideARM and he is a frequent speaker at industry events.