Does A Small Business Have Any Rights Under The Fair Debt Collection Practices Act
Small businesses do not have rights under the Fair Debt Collection Practices Act. However, some state laws protect businesses, and there are actions you can take to defend your rights. For example, you dont have to pay a debt to a collection agency that cant prove you owe them. You can also hire a collection attorney if your business is being hounded by a debt collector.
Determine Extra Fees The Agency Is Charging
Step 5 is perhaps the most important step in this process. When a debt goes to collection, the agency that acquires your debt can add extra fees and expense charges to the original amount.
Under the Fair Debt Collection Practices Act, a collection agency can charge a reasonable fee for their efforts. However, there are limits to what they can charge, and they must state how much of the amount you owe is their fee.
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Remember, a debt collector must also show proof of the debt you owe when you ask for it. This means the amount they assumed from the original creditor must be clearly identified. Also know that the difference between the amount you originally owed and how much the collection agency says you now owe is a negotiable figure.
What Is A Judgment
Judgments occur when the court has decided that you owe a debt that you have not paid on. Judgments allow the creditor or debt collector to garnish your wages, or place a lien on your home. Having a judgment against you can also allow your bank account to be frozen, and garnished without your consent.
If you do not respond to a summons for debt, then you will have a default judgment entered against you. Default judgments allow debt collectors to use garnishment at their disposal. If you ignore the original summons for a debt lawsuit from Colinfobur this is what you will need to face.
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How To Tell If Your Debt Was Sold Off To A Collection Agency
When a debt is sold off, it may be difficult to track down the collection agency that owns it, given that there are over 7000 debt collection agencies in the US, according to IBISWorld.
Your bank can sell the legal rights to your debt to any of the agencies, but you typically won’t know they did unless they notify you. If they fail to notify you, you may end up receiving a call from an unknown agency requesting you to pay them. When this happens, here’s how to verify who owns your debt:
How Do You Figure Out Whether A Debt Collector Is Legitimate
If someone reaches out and claims to be a debt collector, ask for as much detail as you can about the collection agency, including phone numbers, street addresses, and license numbers if you live in a state that licenses collection agencies. Check that information with your Secretary of State’s office or any other state regulatory authority that tracks these businesses.
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Ask The Original Creditors
If you know you have an old debt that you havent paid but arent sure whom you owe now, contact the original creditor. The creditor should be able to tell you if the debt was assigned or sold to a collection agency. If the debt has been sold, however, the original creditor might not be able to negotiate with you even if it wanted to.
Is The Collection Agency Reputable
Reputation is everything. Thats particularly true with collection agencies. They are reaching out to your clients on your behalf. If they are rude and unprofessional, it hurts your reputation.
Following these tips can provide some assurance that you that youre hiring a reputable and effective collection agency:
- Poll your attorney, accountant or business associates to find out what agencies theyve used and why.
- The Association of Credit and Collection Professionals, otherwise known as ACA International, manages a directory of members that are licensed in your state. ACA International members are required to adhere to specific standards.
- The Better Business Bureau manages a database of complaints and rates businesses based on feedback from consumers. If the collection agency has one or two complaints against it, it may not be a big deal, but if multiple complaints say the same thing, it should raise a red flag.
- Select a collection agency that is licensed and/or bonded in your state and the states where your customers live.
- Check with the collection agency to see that it has errors and omissions liability insurance. E& O insurance covers the collection agency from consumer complaints of improper conduct, such as harassment. In many cases, that coverage extends to your business. E& O insurance is not required by federal or state laws, but its a sign of good faith.
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Know Your Debt Collection Rights
According to the Fair Debt Collection Practices Act , debt collectors are limited in how they can communicate with you. Theyre prohibited from calling between 9 p.m. and 8 a.m., they cant contact you at work if youve told them not to, and they cant tell anyone else, like a coworker, about your debt. They also cant harass, threaten or verbally abuse you.
If a debt collector violates these rules, remind them of the FDCPA. You can also report them to the Consumer Financial Protection Bureau online or by calling 855-411-2372.
Check Your Credit Reports For Signs Of Identity Theft
As youâre going through your credit history, itâs a good idea to look for unusual activity that could mean someone stole your identity. For example, you might see a credit card company you donât recognize from a store you never shop at.
If you believe thereâs an error, send a written letter to each credit bureau where the error is listed. You should be very specific about what the error is, why you believe there is a mistake, and ask that the item be removed. The Consumer Financial Protection Bureau and the Federal Trade Commission have templates you can work from if you need to file a dispute with one of the credit reporting agencies.
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How Long Can A Collection Agency Attempt To Collect A Debt
The statute of limitations on debt varies from state to state. It can be as short as three years or as long as 15 years. That doesnt mean they will chase after your customers for more than a decade. The odds of collecting debt get slimmer the older it is. A bill several months past due is harder to recover than one thats 90 days past due.
What Happens If You Don’t Pay A Debt Collection Agency
Ignoring debt can negatively affect your credit score, making it harder for you to borrow loans from other financial institutions. And when you qualify for a loan, you may have to pay high interest rates.
Debt collection agencies may escalate their efforts to recover the debt by filing a lawsuit against you. Therefore, if you receive a court summons and complaint from a debt collector, you need to file a response within a set time frame.
Failure to file a response gives the creditor an upper hand in the case. The creditor can go ahead and request the court to enter a default judgment against you. If the judge grants the creditor’s request, it means you’ll have no chance to tell your side of the story, and the creditor automatically wins the lawsuit.
Note that if a creditor wins a collection lawsuit, the court gives them the power to find legal means to recover their debt. For example, most creditors opt for wage garnishment, a legal procedure through which some of your earnings are withheld or sent directly to the creditor.
On the other hand, you have a chance to fight the case and even win it if you file a response to the court early enough. So whatever happens, don’t ignore the lawsuit even if you believe you don’t owe that debt.
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Fair Debt Collection Practices Act
This federal law applies only to collectors working for professional debt collection agencies and attorneys hired to collect a debt. It is similar to Texas law, but also prohibits:
- “Unfair or unconscionable means to collect or attempt to collect a debt”
- Any conduct to harass, oppress, or abuse
If you are being subjected to harassing, abusive, or fraudulent debt collection tactics by professional debt collectors and you want to stop further contact with you notify the collector in writing. Keep a copy of your letter and send the original to the debt collector by certified mail.
Are There Some Industries That Use Collection Agencies More Than Others
The answer is yes. While any business can hire a collection agency, some industries need them more than others. On the consumer side of collections, banks, retailers, medical providers, gyms, landlords and personal services are top users. On the commercial side, construction, shipping, manufacturing and accounting companies are among the top clients for collection agencies.
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Go Through Old And New Mail
Who among us hasnt picked up the mail, only to put it in a stack by the front door and leave it there to languish for months? Life gets busy, and it can be tempting to slide unopened envelopes into a bin or drawer and forget about them. But mail can back up before you realize it, and you might miss a notice of a bill or debt.
Take some time to gather all the mail you have. Open it and sort it, carefully looking to see whether you need to take action on something or if you might owe someone money. Keep a notebook or computer nearby so you can make a list.
Summit Account Resolution: Best Collection Agency For Small Businesses
Summit Account Resolutions transparent pricing, low minimum collection balance requirement and variety of service options make it our choice as the best collection agency for small businesses. Summit collects both commercial and consumer debt across the U.S., serving many different industries.
It has some of the lowest rates in the industry, charging as little as 7% for certain first-party collection programs to as much as 50% if its a consumer collection account. Rates are negotiable. There arent any upfront fees, nor additional charges for older accounts. The companys pricing is set on a contingency basis. If Summit AR doesnt collect any money, you dont have to pay. To recover debt, it employs several tactics, including skip tracing and litigation services.
Summit AR serves both consumer and commercial customers, and has experience collecting debt from a range of debtors. It employs ethical and empathetic tactics, and strives to treat debtors with dignity and respect. Summit ARs debt recovery rate is 34.8%, but according to the company, there are some cases in which that rate is 80%.
When you become a client of Summit AR, you get access to an account manager. You also get to use an online portal, enabling you to add new accounts and monitor existing ones whether its 12:00 p.m. or 12:00 a.m.
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Debt Collectors Cant Take Your Home Or Your Wages
In Texas, if your residence has been declared a homestead, it cannot be taken to pay a debtexcept for debts taken for the purchase of the home , for home improvements, for home equity loans or to pay certain taxes.
- Learn more about .
Wages may be garnished only to pay debts related to court-ordered child support, back taxes, and defaulted student loans. Debt collectors cannot garnish wages for repayment of consumer debt.
If a debt collector threatens to take your home or garnish your wages, you may be the victim of a debt collection scam. File a complaint with us immediately.
How To Start A Collection Agency
In order to start, it is important to follow the steps mentioned below.
1. Understand the pre-requisites of opening a collection agency
The legal requirements vary significantly based on the state in which one intends to operate each state has its own unique requirements. Firstly, they should register within their own state. Later it can register and possibly get licenses in other states too.
2. Learn about the various debt collection laws
There are plenty of laws that govern the actions of a collection agency, and each state has different rules and regulations. So, one needs to do the necessary research to learn about the various debt collection laws. Some of the major federal laws that a collection agency must comply with include Gramm-Leach-Bliley Act , Telephone Consumer Protection Act , Health Insurance Portability and Accountability Act , Fair Credit Reporting Act , and Fair Debt Collection Practices Act .
3. Plan out capital and operating expenses
The prospective collection agency must plan and arrange the capital required to make it through the initial phase. After that, it needs to plan out the operating expenses for the first 2-3 years basic office supplies, salaries, and other operating expenses. Further, costs of registration, obtaining necessary licenses & bonds, marketing, and securing clients should also be factored in the expenses. The costs would vary based on the number of states one intends to operate in.
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Start With The Original Creditor
Sometimes, you know that a debt has gone to collections, but thatâs all you know. Maybe you contacted the creditor and they said that the debt was no longer being held by their office. Maybe you got a letter from a collection agency months ago but threw it away or lost it. Whatever the situation, the original creditor can be a quick and easy source of information. They likely wonât be able to discuss your debt with you after itâs been sent to collections. But they can often provide you with the name and contact information for the debt collector. This information will help you get in touch with the collection agency. It will also help you sort out legitimate debt collection calls from scams.
Owing Money To A Bank
If you have an overdue debt owing to a bank, the bank can use its right of set-off to recover the money. The right of set-off allows a bank to withdraw money from your accounts to pay your overdue debt. The bank does not have to give you notice or ask your permission before taking this action. The bank does not have to ask the permission of the court.
Banks may use their right of set-off to collect overdue payments on credit cards, loans, overdrafts or lines of credit. A bank may withdraw money that you have on deposit in any of its branches and apply it to your debt. The bank does not have to leave any money in your account.
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Full List Of Collection Agencies
Here is a full list of collection agencies and a summary of what each company claims to offer. This alphabetical list also includes our best picks.
Account Management Systems AMS collects commercial debts. Based out of Tampa Bay, this debt collection service collects debts nationwide, charges no upfront or sign-up fees, and only collects money if it recoups your debts.
Alexander, Miller & Associates LLC Alexander, Miller & Associates is a national agency that specializes in large-balance collections. It offers demand letters, commercial credit reports, onsite investigations, prelitigation services and skip tracing. The company states that it has collectors who specialize in trucking transportation and freight, wholesale seafood and produce, restaurant supply, and heavy equipment rental.
American Profit Recovery American Profit Recovery serves a wide variety of industries, including small businesses, lawn care/landscaping and banking. According to the company, its mission is to resolve debt while treating everyone with dignity and respect. It offers clients an online portal to enter new delinquent accounts, monitor progress and get a snapshot of American Profit Recoverys performance.
Review Your Credit Reports
Most debt collection agencies report to at least one of the three main credit bureaus . For this reason, checking your credit reports is an easy way to find out the name and contact information of the debt collection agency that owns your debt.
Youre entitled to a free copy of your credit report from each of the three main credit bureaus every 12 months . 1 To request copies of your credit reports, visit AnnualCreditReport.com.
Theres no knowing which credit bureau your debt collector will report to, so you might have to check all of your credit reports. Also, bear in mind that collection accounts that are older than 7 years or brand new may not appear on your credit reports. 2
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What To Expect After You Receive A Notice
- You should validate that the caller is representing one of the private collection agencies listed above.
- The private collection agency will ask you a series of questions to make sure theyre talking to the correct person.
- You will be asked to exchange portions of the Taxpayer Authentication Number with the private collection agency to validate each others identity.
- The private collection agency will be courteous, professional and respect your taxpayer rights, while following the laws.
- The private collection agency will work with you to resolve your overdue taxes. They will NOT threaten you. If you feel the private collection agency acted inappropriately, heres how to report it.
For more information you can also view the IRS video Private Collection of Overdue Taxes.
