Commercial collections are attempts to recover unpaid business invoices owed to another business. Consumer collections are when a consumer owes a debt to a business.
Because there are dramatic differences between Business-to-Business (B2B) / Commercial collections and Business-to-Consumer (B2C) / Consumer collections, it's important for your business to be matched with the most experienced agency.
Commercial Collections Explained
Both business parties agree to payment terms, credit, or financing. The Accounts Receivable Department issues an invoice with the expectation that the client's Accounts Payable Department will pay in a timely manner. If payment isn't made, the debt is sent to in-house collections or to an outside collections agency (first vs third party collections) or potentially litigated in court.
Commercial collections are different in these ways:
- Commercial collections agencies are not regulated under the FDCPA, however, they may be required to be licensed in the states in which they collect.
- With a larger expected payment, an unpaid commercial invoice could affect a business or cash flow, forcing them to halt production or become unable to pay vendors.
- Collections efforts involve communicating with the Accounts Payable Department and also potentially escalating to a credit manager.
Consumer Collections Explained
Business-to-consumer (B2C) relationships are typically transactional, such as shopping at store, or recurring, such as paying utilities. Payments are made at the time of the transaction or the consumer agrees to pay at regular intervals. When the consumer stops payment on the transaction or recurring agreement, the business has the choice to terminate the agreement, reclaim the property, evict a tenant, or hire a consumer collections agency.
Consumer collections are different in these ways:
- Consumer collections agencies are regulated by the Fair Debt Collections Practices Act (FDCPA) which limits the ways collection representatives are able to contact consumers to procure payments.
- Collections efforts involve tracking down an individual to fulfill their payment obligations.
- The amount of the debt may be considerably smaller than what's owed in a B2B transaction.
Both commercial collections and consumer collections agencies may specialize in particular industries. Research will help determine the best fit for your needs.