Laws About Business Debt Collection That You Didn’t Know Existed

Laws About Business Debt Collection That You Didn’t Know Existed

Debt collection is one of those areas that a lot of laws regarding how the process should be handled have been released. Trying to uncover each new law and deciphering the legal jargon can be difficult for those with a legal degree. With more and more consumers understanding what some of their legal rights are when it comes to the debt collection process, you’re under more scrutiny than ever before. By understanding some of the laws regarding the debt collection process, you can better protect your business from legal suits from unhappy clients.

There Are Statutes Of Limitation
It’s very important to understand that the debts owed to you have an expiration date. Just because a client doesn’t pay their bill, doesn’t mean that you can go after them for payment forever. In most states, the statute of limitation for debt collection is four to six years from the date that the last payment was received. This can vary up to about 15 years depending on which state your business is located in. You should consult with a Massachusets debt collection attorney to determine what the specific statute of limitation is in your individual state.

You Can Only Contact Debtors During Certain Hours
It’s important to note that you can’t just pick up the phone and call debtors at any second of the day you find the time. Rather, you have to contact the debtor during reasonable hours of the day. The term ‘reasonable’ is defined specifically per state. Most will define these hours as between 8 AM and 9 PM. However, it pays to check with a debt collection attorney Boston to ensure you’re calling during legal hours to discuss debts with clients.

You Can’t Threaten Clients
While you may believe that threatening clients can help you to collect the debt that’s owed to your business, you legally can’t. Threatening can mean a lot of different oral tactics. You can only tell a client that you’re going to sue them if your business actually intends to. If you don’t, then you may not threaten to sue your client. You can’t threaten to take their property, have them arrested, talk with others about their debt, or publish anything about their debt except with the credit reporting agencies.

You Can Only Add Fees Defined In Your Contract
When you first set up a contract with a client, there are areas of billing that you address. You should have notated what the fee is for not paying on time, what interest rate you can increase the bill to after a set period, and so forth. When a client lapses on a payment to your company, you can only charge the fees which were defined in your initial contract. You may not tack on additional fees for things like debt collection paperwork and so forth. You may only charge what is specifically stated in your contract and that’s it.

You Must Identify Yourself As A Debt Collector
When you’re working to collect a debt that is owed to you, you must identify yourself as a debt collector. You cannot misrepresent yourself when speaking with clients. Doing so can land you in a lot of legal trouble. Instead, be honest with the debtor about who you are and why you are calling. You should be as upfront as possible from the very start of the collection call to ensure that you don’t violate any legal statutes while on the phone.

You Must Inform The Client When You Transfer Their Debt
If your in-house debt collection efforts went unnoticed, then you may be considering transferring the debt to a debt collection agency. When this happens, you must inform the client of the transfer. In most states, the law requires 30 full days from the time you alert your client of the transfer until you can physically transfer the debt to a debt collection agency. If you decide to hire a debt collection agency while still keeping the debt in-house, then you’ll need to notify the client of who you’ve hired. This way, the client knows that another company will be contacting them regarding their debt.

You Can Apply For Property Distrain
Property distrain is a legal term used to define the seizure of business property. In the event that your collection practices don’t result in payment from the client, you can have your legal representative apply for property distrain with the court. They can also apply to have the business possessions seized to assist in recovering the debt that is owed to your business. It’s a good idea to consider legal help when moving onto this step of property distrain as it can get confusing trying to navigate the legal process on your own.

Your Letters Must Always Have Legally Correct Information
When you send out letters regarding a client’s debt, you must ensure that you have all of your company information correct. Any invalid contact information can result in hefty legal fines and the possibility of not being able to collect on the debt that is owed to your business. Be sure that all the information which is placed within your letters of demand is completely accurate before ever mailing out the letters.

When trying to inform your staff of proper debt collection practices, it can be quiet difficult to do without the right source of information. When doing research on debt collection laws, you’ll likely run across the FDCPA or Fair Debt Collection Practices Act. Realize that this act only regulates the collection of debt from individual consumers. It doesn’t regulate business or commercial debt collection practices.

There is no actual set of specific laws that regulate commercial debt recovery. Rather, there are various laws spread throughout many different acts, statutes, and organizations that specify legal collection practices. Identifying all these specific mentions regarding commercial debt collection can be tough to do on your own. We recommend that you hire an experienced commercial debt collection attorney who can help you through the debt collection process with ease.