Collection Agencies deal primarily with the collection of claims asserted by an individual or business entity against another. There are two types of claims:
- Commercial Claims – consist of an obligation incurred during the course of conducting a business which arises from goods sold or leased, services rendered, or monies loaned for the use in the conduct of a business or profession. A few types of commercial claims:
- Open Accounts – credit extended without a formal written contract, represented on the books and records of the seller as an unsecured account receivable for which payment is expected within a specified period after each purchase.
- Lease Agreements – written agreements for which equipment or facilities can be obtained on a rental payment basis for a specified period of time.
- Consignments – An arrangement under which a consignor (seller) remain the owner of the property until such time as the consignee (buyer) pays for the goods…usually when the goods are sold.
- Guarantees – a written promise or pledge to answer for the debt or default of another.
- NSF Checks – term used by a bank on a rejected check when the maker of the check has an account but does not have sufficient funds for payment of the check.
- Judgments – court decision granting (or denying) a plaintiff’s claim based on the facts of the case. It’s a formal determination of the amount due from a defendant (debtor) to a plaintiff (creditor) in the business of collections.
- Consumer or Retail Claims – consist of any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
Congress created the FDCPA to prohibit debt collectors (debt collection agencies, collection attorneys, and entities that purchase delinquent debts in an attempt to collect them) from using unfair, deceptive, or abusive practices when collecting consumer debts. The FDCPA places numerous restrictions on what debt collectors are allowed to do when collecting debts and provides consumers with certain rights and remedies against those who violate any of its provisions. However, the FDCPA generally only applies to third party debt collectors, not a creditor. It also only applies to Consumer or Retail Claims…not commercial claims.