Commercial Collections
Business man and business woman shaking hands

What Are Commercial Collections?

You have likely heard about collections agencies from time to time. These agencies collect unpaid debts from those who have not met their financial obligations. However, it is likely that you are thinking about collections agencies from the standpoint of consumer collections. Consumer collections are quite different from commercial collections. Consumer collections mean that the collections agency tracks down an individual so that they fulfill payment obligations.

On the other hand, commercial collections involve collecting payments from another business. While that is the main difference, there are other differences, as well. For example, the Fair Debt Collections Practices Act does not regulate commercial collection agencies. That is a major difference between business-to-business collections and consumer collections.

How Do Commercial Collection Agencies Work?

One thing that you have to keep in mind is that a commercial collection agency usually does not work for the creditor. In this case, the creditor is the business that is owed money by another business. A commercial collection agency is typically a third-party contractor to the creditor. A commercial collection agency only receives payment when they are able to collect on the particular business debt in question. That is one reason why collection agencies are aggressive when it comes to collecting debts.

As previously stated, the Fair Debt Collections Practices Act regulates consumer collections but not commercial collections. However, this does not mean that a commercial collection agency is completely unregulated. Instead, the commercial collection agency has to follow state regulations and laws.

In some states, a commercial debt collector has to be bonded and licensed before they do any debt collection within the state. Usually, being bonded and licensed means that the debt collection agency has to submit an application, provide proof of bonding, and financial disclosures, and pay licensing fees. Of course, this varies from state to state.

Additionally, you should know that there is an organization called the Commercial Collection Agency Association. The Commercial Collection Agency Association certifies members after they complete an extensive application process. The CCAA does not have any power over non-members and it is not a governmental body.

Still, the organization does have significant clout in the debt collection field. As a result, being a registered member of the CCAA provides a number of benefits for a commercial collection agency. One of the benefits of being a registered member of the CCAA is that membership makes the commercial collection agency in question more credible.

How Does a Commercial Collection Agency Get Paid?

Oftentimes, a commercial collection agency only gets paid when they collect on a certain business debt. However, that is not the only possible payment arrangement. The two main types of payment arrangements for commercial collection agencies are a contingency fee and a flat fee. The contingency fee means that the commercial collection agency only receives payment when they collect money from debtors.

The contingency rate depends on the amount of the debt and the time of the collection period. On the other hand, a flat fee is fairly straightforward. The creditor pays the commercial collection agency a set flat fee in return for the collection agency collecting the debt.

What Are The Benefits of Using a Commercial Collections Agency?

One benefit of using a commercial collection agency is that the agency has a significant financial incentive to recover the debt. That is even more true when you set up a contingency fee payment arrangement with the collection agency. The agency will be highly motivated to collect the debt as quickly as possible. Additionally, a commercial collection agency is also quite efficient when it comes to contacting the business that owes your business money.

A commercial collection agency will also help you maintain a positive relationship with the business that owes you money. This can prove helpful in many ways, especially since you often want to continue working with the business in question. A commercial collection agency will reach out to the debtor and figure out the appropriate strategy to use when collecting the debt.

In some cases, an unconditional and tough approach is the best way to get a debtor to pay what they owe. However, other cases might require innovative problem-solving and some negotiation. Payment arrangements and partial forgiveness might be part of that innovative problem-solving. Regardless of the situation, a commercial collection agency can greatly simplify the debt collection process.

Commercial collection agencies also have the ability to research relevant information like debtor company credit. The collection agency can thoroughly investigate the company’s assets and give you their payment history, as well. The commercial collection agency can use this information to figure out the next step to take.

Barnwell Law Group Can Help You With Commercial Collections

If you are looking to collect commercial debt, consult Cory Barnwell of Barnwell Law Group. He has many years of experience with commercial collections and can provide you with the legal assistance you require. Contact Barnwell Law Group today and start the process of collecting the money that you are owed.

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