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Encountering the tidal wave of business bankruptcies

On Behalf of | Jul 9, 2020 | Debt Collection |

The business impacts of the COVID-19 pandemic have been both broad and deep across the country and globally. Many small businesses in the U.S. were unable to secure funds from the federal government through the Paycheck Protection Program and are waiting to see whether additional assistance is forthcoming in a next phase.

Unfortunately, many companies may not survive even if more government help is approved. 2020 is expected to see a record number of so-called megabankruptcies – filings by companies with $1 billion or more in debt.

Understand the differences in commercial collections

Businesses looking to collect from other businesses need to be aware of the differences between commercial debt collections and consumer collections. Those pursuing consumer debt must follow regulations spelled out in the Fair Debt Collections Practices Act (FDCPA). This restricts when and where debtors can be contacted, prohibits harassing a debtor, and prohibits contacting a debtor when it is known that the debtor is working with a lawyer.

Commercial collections, which typically involve larger sums of debt than consumer cases, are not subject to regulations in the FDCPA. However, there are regulations that pertain to commercial debt collection. The Commercial Collection Agency Association (CCAA) supervises the activities of commercial debt collectors.

Commercial debt guidelines

Whether a business attempts to collect a commercial debt itself or hires a collection agency to do so, the creditor must adhere to these regulations. For example, a creditor must provide only valid and verified information to a debtor when sending communication of any sort about a debt or an attempt to collect a debt.

Debt collection is a sensitive endeavor. The pressure to collect money owed can lead to companies operating outside of the legal boundaries, sometimes unwittingly. It is a wise decision to work with a knowledgeable commercial debt collection law firm to make sure you or a collection agency hired by your company does not place itself at risk of being accused of wrongful collection activities.