A Primer on Collecting Your Debts Safely

When someone owes you debt, collecting on that debt can be the difference between keeping your business’ doors open, or having to close them. But you also know that debt collection can be not just distasteful, but also can lead to legal problems, if it’s not done correctly. How can you stay safe when collecting debt?

What Kind of Debt is It?

The first thing to consider is whether you are collecting business or commercial debt, or whether you are collecting consumer debt, generally defined as debt incurred for household or personal use. That’s because the debt collection laws for both kinds of debt are different.

Note that we said “business debt,” not collecting “from a business.” That’s because what matters is the nature of the debt itself—not the debtor. So, for example, if Joe has a summer home he rents out and he incurs debt to fix up the home, the debt is a business debt, even though Joe is just a person, without a business.

What matters is the status of the debt, at the time the debt was incurred. So, if Joe borrowed money to fix his home that he lived in, and 5 years later he decides to rent out that home for money, the debt remains personal given that when he first took the loan out, he was living in the property.

Commercial Debt

If debt is commercial and business, there are very few laws that say how you can and cannot collect debt. It is always best to be civil, avoid threats, and sound professional, as your collection letters may be evidence and you don’t want a judge or jury turning against you because of the tone of your collection letters.

But legally, with business debt, it is hard for any debtor to sue you for your collection methods, given that there are really no laws that say how most common business debt can and cannot be collected.

Consumer Debt

Personal or consumer debt is different, and there are a myriad of laws that protect consumers, and say how you can and cannot collect debt.

Note that the Federal Fair Debt Collection Practices Act (FDCPA) protects you if you are collecting your own debt, so you can’t be sued for what you say or do when you do that. However, Florida’s debt collection laws do apply to you if you’re collecting your own debt.

What Can You Say or Not Say?

There is a long list of things that you can and cannot do when collecting debt.

As a general rule, never threaten—even politely. A false threat, or saying you’ll do something you legally can’t do (like tell an employer about debt, or take someone’s home), can get you in trouble. Never tell a consumer his or her legal rights, because if you’re wrong, you may end up sued.

Don’t predict, for example, telling a consumer what a court will do, or what a jury will say, or what problems the consumer may have, if he doesn’t pay the debt.

Never harass—multiple calls, at inconvenient times, can lead to lawsuits, as can any language that is demeaning, insulting, or derogatory.

Call the West Palm Beach business litigation lawyers at Pike & Lustig today for help with your business debts.

Sources:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0559/Sections/0559.72.html

consumerfinance.gov/ask-cfpb/what-laws-limit-what-debt-collectors-can-say-or-do-en-329/#:~:text=The%20Fair%20Debt%20Collection%20Practices%20Act%20(FDCPA),-The%20Fair%20Debt&text=The%20FDCPA%20prohibits%20debt%20collection,%2C%20family%2C%20or%20household%20purposes