Collections Insider

Many clients have asked my why some claims are treated differently then others. I would like to present the answer in two articles. This first article will explains how the claims are broken up into two categories and how they are treated from a regulatory standpoint. My second article will address issues such as why a president of a company cannot be held responsible for the debts of the corporation.

In the collection industry debtors/debts are broken up into two categories; consumer claims and commercial claims.

1. Consumer claims are debts owed by individuals, i.e. John Smith, Mary and Tom Jones

2. Commercial claims are debts owed by a business, i.e. XYZ, Inc., Z&Z, LLC.

Consumer collection efforts are governed by the FDCPA. The FDCPA protects debtors’ rights and provides guidelines for the behavior of the collector, collection agency and collection attorney. All third party collection agencies and attorneys must follow the FDCPA or face fines and or legal action. Collection agencies are required to send a debtor a thirty day demand letter which gives the debtor an opportunity to provide proof of payment, pay the debt or dispute the debt before legal action can be taken. The debtor has the right to request proof of the debt and the agency/attorney must provide proof under the guidelines of the FDCPA. Some of the finer points of the FDCPA are:

The hours in which collection agencies are allowed to contact debtors- no earlier than 8am and no later than 9pm. No time that is inconvenient to the debtor.

Written and electronic Communication- No e-mails or faxes. All written communication must include the mini-miranda, This is an attempt to collect a debt and any information obtained will be used for this purpose. Envelopes cannot show anything that indicates the letter is from a debt collector. No postcards.

Legal Representation- If a collector has been made aware that a debtor is represented by an attorney all communication with the debtor must cease. The collector must work with the attorney to resolve the debt.

False representation- A collector cannot use any false, deceptive or misleading representation or means in connection with the collection of any debt. The collector cannot threaten any action that cannot legally be taken or is not intended to be taken.

Harassment- A collector cannot use the threat of violence or criminal means to collect the debt. A collector cannot use profanity or use language that is intended to abuse the hearer.

To read the FDCPA in it’s entirety go to http://www.ftc.gov/os/stautes/fdcpa/fdcpact.htm.

Commercial debtors are businesses that fall under the following business structure; Corporation, S Corporation, Partnership, Limited Liability Company and Limited Liability Partnership.

If a business is a DBA, sole proprietorship or fictitious or assumed name the debt/debtor is considered a consumer claim and the collection agency must follow the FDCPA.

Commercial debtors are not protected by the FDCPA however the Collection agency/attorney should conduct themselves professionally and ethically when handling these claims. Certain tactics can still be viewed as harassment and could provoke a law suit.

I hope this clarifies things further. Don’t forget to check out November’s newsletter for the second part of this article.

About the author: Jan Conte is the President of Your Collection Solution, LLC, a debt collection agency out of Newtown, Pennsylvania. She has over twenty years experience in the debt collection industry. You can find more of her articles at www.yourcollectionsolution.com/blog/.

This entry was posted on Tuesday, October 9th, 2007 at 7:02 pm and is filed under Debt Collection Tips and Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.