Commercial Debt Collection in Los Angeles
Business owners, especially those starting out, have many responsibilities and often wear different hats while running their businesses. In many instances, to grow their customer base, commercial businesses grant credit to their customers or allow for deferred payments for their products or services.
At the federal level, the Fair Debt Collection Practices Act seeks to eliminate abusive debt collection practices. This statute only applies to third-party collection agencies and not to the original creditor. The California Rosenthal Fair Debt Collection Practices Act has similar objectives but also applies to original creditors as well as debt-collection agencies. Therefore, it is important for commercial businesses to keep in mind the following points when collecting any debt from their customers, regardless of whether they will collect directly or outsource the collection service to a third-party provider.
- Document your sales and extension of credit
It is advisable to document the credit in writing. This written document can be a contract or an invoice. It must include a clear reference to the amount that remains unpaid as well as the date the document was drafted. This is especially important for several reasons, including helping determine the amount of time a creditor will have to be able to collect the debt. This will also ensure that the creditor or debt collector is complying with the debtor rights under applicable law.
2. Statute of limitations
A statute of limitations is the amount of time during which the creditor will be able to attempt to collect the amount due after the issuance of the credit. In California, the statute of limitations for collection of any debt is four years if the debt arises from a written agreement. For oral agreements, the statute of limitations is two years. While collectors and creditors may continue to attempt collecting debts past the statute of limitation, no legal action may be commenced after the statute of limitation has lapsed.
3. Debtor’s rights
It is important to keep in mind the debtor’s rights and not to violate any of them while trying to collect the debt. Any violation of these rights would expose the creditor business to legal actions by the debtor:
- Right to dispute the debt and receive detailed information
- Right not to be harassed or abused. Debt collectors are also not allowed to make any false or misleading statements and should not call at unusual or inconvenient times or places
- Debt collectors may only contact a creditor’s employer to verify employment or confirm location information
- Wages may not be garnished unless ordered by a competent court
- Third parties may only be contacted to confirm location information
4. Find a legal advisor with extensive collection experience
A Los Angeles commercial debt collection attorney may better assist you in collecting your outstanding credits and ensuring continued compliance with the Fair Debt Collection Act. Don’t hesitate to reach out to Litigation, P.C., for a consultation.
This post is informational only and should not be understood as legal advice. This post does not create an attorney-client relationship.
More
ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text#802
oag.ca.gov/consumers/general/debt-collectors
leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=3.&title=1.6C.&part=4.&chapter=&article=1
