Business debt collection

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Helene Mueller
eCollect support team

Business debt collection refers to commercial recovery of delinquent payments, where both the creditor and the debtor are business organisations. Commercial debt collection is performed by specialised debt collection agencies (DCAs), providing debt recovery either on local or international level. Business debt recovery is more complicated process than the consumer debt recovery, as the B2B (“business-to-business”) collection is connected with larger loans, which can reach millions per each business debtor. Failure to settle a commercial debt can result in serious business liquidations, management restructure and even bankruptcy of the whole debt organisation. B2B loans are usually taken to fund different corporate investments or capital. Commercial debts are used to supply purchase of diverse equipment, startups, development of products and business services, even training programs. Business debt collection portrayal & services


Commercial debt collection agencies

Commercial debt collection agencies mainly focus on unsecured commercial debts. Their aim is not only to collect outstanding amounts, past- due payments and bad corporate debts, but also to preserve the relations between creditor and subject of debt, and not to violate consumer’s rights as a debtor and as an individual.

B2B debt collection is carried out in return of interest rate for the DCA. Such commission fee is charged in accordance with different acts and regulations. Usually it is not above 8%, but it can depend on the country. Some commercial DCAs request payment prior to the debt collection, some operate according to the “no collection, no fee” method. Sometimes corporate debt collection can be free of charge for the creditor, as there are agencies, which take their interest from the debtor, not from the lender.

Commercial DCAs offer wide range of local and international services, as they can serve either one country or operate on a worldwide level. Their collection methods and tools are in compliance with law and up to the accepted ethical standards. Business debt recovery usually consists of different pre- legal, legal and court actions and proceedings. Commercial recovery agencies offer: tracking and tracing the business debtor; thorough credit and financial condition checks; insolvency supervision and continual monitoring of past debt companies and of eventual new bad debts. Corporate debt collection agencies also provide for the creditor continual screening and inspection of future business partners.

Business debt collection can consist of offering different payment arrangements, such as CVAs (Company Voluntary Arrangements), which are applicable mainly for United Kingdom & Wales. A CVA represents a legal agreement that allows the company in debt to repay all its debts over a specific period of time (e.g. fixed amounts transferred per week or per month). Usually proposing a CVA is a better option also for the creditor, as otherwise a company in debt can claim liquidation or even bankruptcy.

The debt amount can be forcefully collected by seizure, confiscation or liens upon debtor’s company equipment or even the whole building, if the debt is very large. Business debt recovery attorneys have the legal right to demand garnishment of all debtor’s business accounts as well. Unlike consumer debts, wage garnishment cannot be forced upon commercial debtors.

Local and international business debt collection supervision

Commercial debt collection is often regulated by the same laws, which control consumer debt recovery. However, there are differences, as in some countries a DCA has to be licensed for collection of commercial debts in order to perform B2B debt collection. In UK business debt collection is regulated separately from consumer debt recovery by the Late Payment of Commercial Debts Act (LPCDA), ext. link 5. The same act applies for Wales, Scotland and Northern Ireland. As Scotland possesses its own legal system, its parliament can change or even replace the LPCDA. According to this act, a UK creditor can claim payment even from overseas consumer in debt.

In US there are no laws, at least no Federal ones, which control commercial debt recovery. The Federal Debt Collection Practices Act is the main debt collection regulator, but applies only for individual debts. However, there are different Commercial Collection Statutes for each US state, e.g.: for Oregon- http://www.oregonlaws.org/, for New York- http://www.nyc.gov/html/dca/downloads/pdf/Debt.pdf, for Tennessee US state: http://www.govcollect.org/files/Tennessee_Debt_Collection.pdf, etc. Although different acts control corporate debt collection, a commercial recovery agency has to be licensed and follow consumer debt collection’s acts in order to be recognised as a DCA.

There are international acts and regulations as well. The EC (European Commission) has state several laws for business debt collection, such as: the European Order for Payment Procedure; the EC Directive 2000/35/EC, also known as the EC Directive on Combating Late Payment in Commercial Transactions; the European Enforcement Order for Uncontested Claims, and others.


Used literature & external links

http://www.ehow.com/list_6699295_commercial-debt-laws.html 

http://www.ehow.com/info_8144534_difference-consumer-debt-commercial-debt.html  

http://www.burtcollect.com/debt-collection-laws-state/  

https://www.gov.uk/company-voluntary-arrangements  

http://webarchive.nationalarchives.gov.uk/+/http://dti.gov.uk/latepay/dtiusrgd.pdf