Fair Debt Collection Practices Act
Massachusetts debt collection is covered under the Fair Debt Collection Practices Act (FDCPA) but only as it relates to consumer debt. Commercial debt is not protected under this legislation, however. There is an understanding that when someone incurs debt for their business, the decision was made after careful planning while it is not unusual for consumers to enter into debt without a full understanding of what they are taking on. The FDCPA prohibits certain actions by a debt collector, such as calling early in the morning or late at night, making threats or harassing the debtor. Also keep in mind that the FDCPA provides rules for debt collectors, not the original creditor.
State Regulations for Commercial Debt
State regulations may determine what methods may be used to collect a commercial debt. Under Massachusetts law, a “consumer” is any natural person obligated or allegedly obligated to pay any debt. However, the law also states that “debt” is an obligation created for personal, family or household purposes. There is no mention in the law regarding protections for businesses that owe debts. The law does, however, require that debt collectors, whether for consumer or commercial debt, must place a sufficient bond with the state treasurer before attempting to collect any debts in the state.
Commercial Debt Differences
In some cases, commercial debt may be protected better than individual debt. In most cases, commercial debt is obtained in the name of a company. If that company is a limited liability corporation, partnership or corporation, it may not be possible to file small claims in Massachusetts to collect the debt against the owner of the company. If the business is failing, there may not be enough business assets available to seize and the business may not have the cash to even pay a judgment if you are successful.
If the company entered into debt in order to acquire assets, you may have a better chance at collecting by seizing those assets. Keep in mind that this will require small claims action if the debt is small. However, small claims in Massachusetts is limited to actions of $7,000 or less. It is not unusual for commercial debt to be significantly higher than $7,000, requiring you to file your claim in a higher court which can be more costly and more complicated.
Statute of Limitations
The statute of limitations for debt collection in Massachusetts is six years and the clock begins when the contract for the debt was breached. This means that a company cannot be sued for outstanding debt, whether consumer or commercial, once it has reached the age of six years from the time it was determined the creditor was no longer adhering to the contract, usually when the debt went into default.
Commercial Collection Process
Collecting a commercial debt requires an aggressive process, using methods that make it clear to the debtor that unless they file for bankruptcy, the debt will be collected. Most collection agencies begin with a letter demanding payment, offering a specified amount of time to respond. The letter makes it clear that if the debtor does not respond, court action will be taken. The collector should keep you informed at all times of the process. If the debtor offers a settlement, you should be the one making the final decision. Although the collection agency may provide advice on whether to take a settlement, they should leave the ultimate decision up to you.
Choosing a Commercial Debt Collector
Because collecting commercial debt is much different than collecting consumer debt, you want to choose a collection agency with experience in commercial debt collection. At Goldberg & Oriel, Massachusetts Debt Collection Attorneys, we have more than 50 years’ experience collecting all types of debt. We believe that once we accept a case for collection, we have an obligation to succeed, which is why we don’t take every case presented to us. We work on a contingency basis, only receiving payment when our clients do, working with them throughout the process to help them collect what is owed to them. As one of our clients, you will receive a written fee agreement that not only describes what we will do, but also what we expect from you. This eliminates “surprises” when the account is collected.
If you have a commercial customer who has stopped paying, contact Goldberg & Oriel, your Boston debt collection lawyers, to see how they may be able to help. We will review your case and guide you through the process from beginning to end. All settlement offers will be discussed with you and we offer a contingency fee payment process which means we don’t get paid if you don’t get paid. Call or fill out the easy online form today to see how we can get you the money you are owed.