Collecting Customer Debt? Review Your Local Consumer Protection Laws First
by NicoleD, Former Moderator
- Created: January 19, 2011, 2:08 pm
- Updated: May 18, 2011, 1:30 pm
Many business owners face the frustrating reality of late or non-paying customers. This article explains the laws and regulations that you must comply with when attempting to collect on customer or vendor debt.
For a primer on collecting customer debt, read Getting Your Customers to Pay Up; Parts 1 and 2 by Caron Beesley. In part two of her series, Ms. Beesley explains that common options for business owners looking to recoup late or non-payment include developing flexible payment plans, hiring debt collection agencies, or heading small claims court.
Before you begin to take any legal action, make sure that you have a thorough understanding of consumer protection and debt collection laws.
Usury laws regulate the charging of interest in excess of maximum allowable limits, which generally vary by state. Usury laws can be complicated to navigate, as there are many exceptions to the general rules.
- The Truth-In-Lending Act is a federal regulation that controls the amount of interest that can be charged on overdue balances.
- However, state usury laws may be different (or stricter) than the federal Truth-In-Lending regulations, so it is important to understand your local requirements. For details, contact your local consumer protection agency. A state-by-state listing is available at consumeraction.gov.
Depending on the circumstances, other laws may affect your attempts to collect on debt.
- If you are dealing with a customer who has declared bankruptcy, you are prohibited from taking further collection actions until the custome-s bankruptcy court settles the matter.
- If you decide to use a debt collection agency, be proactive in researching whether they have a history of complying with consumer protection laws. The Federal Trade Commission (FTC), the national consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA). While the debt collection agency you hire is responsible for complying with the act, you can sour your reputation if you get in business with a company that does-t observe fair debt collection practices.
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