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Consumer vs. Commercial Collections Collections can be broadly classified into two basic types:
Consumer collections involve collection activities that occur between a business and a consumer. This type of collection is relatively heavily regulated. The regulations are intended to protect consumers against overly aggressive or deceptive practices that might be used by an unscrupulous collector against what is assumed to be a relatively inexperienced and unsophisticated consumer. The other major type of collection is commercial collection. This deals with debts owed from one business to another. This area is less regulated. The presumption is that most businesses are sophisticated enough to understand the company's rights, and are able to deal with a collector in a well-informed manner. The techniques used by companies dealing primarily with commercial collections are markedly different from those used to collect consumer debts. The most striking example of this is that due to the high volume of relatively low dollar accounts, in consumer debt collection the written payment reminder or dunning notice is the most commonly used and therefore the most effective collection tool. In commercial collections, the most effective way to request payment is by telephone, and written correspondence - if used - is not expected to have immediate results. Key point: The laws change if a creditor is dealing with a consumer (rather than a commercial) debt. The collector should have a thorough understanding of the laws governing consumer debt collection before ever picking up a phone. Edited by Michael Dennis, author of "Credit and Collection Handbook" available at the NACM Bookstore. |
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