There are many small businesses in the Sacramento area that offer consumer financing for larger purchases or installment contracts so that the consumer does not have to pay in one large lump sum. One major benefit of financing is that the small businesses can collect interest on the payments in exchange for the convenience of smaller payments on the part of the consumer. Similarly, small businesses benefit from installment contracts in that the business does not have to deliver a finished product or service before receiving partial payment.
In some cases though, consumers break their promises to pay the remaining balances. When this happens, businesses and their agents are free to engage in actions to collect the debt. However, there is one major caveat: the debt collection practices must comply with a federal law called the Fair Debt Collection Practices Act (FDCPA). This is where an experienced Sacramento small business attorney can be a valuable asset to the small business, acting as a consultant on FDCPA compliance.
In general, the Act is designed to protect debtors from fraud and harassment in the collections process. For example, before the Act, it was commonplace for debt collectors to insinuate that the debtor was committing a crime and that the debtor could go to jail if the debt was not paid by a certain date. Debt collectors would call the debtor’s residence up to dozens of times a day, or find the debtor’s place of business and call there as well. In extreme cases, intimidation and threats of violence were used to induce prompt payment of debts. It is not surprising that these types of debt collection practices do not fly in the modern business world.
Under the Act, debt collections are reduced to a set of heavily-enforced rules. Collectors may not call a debtor before 8 a.m. or after 9 p.m. They also may not contact the debtor’s place of business if the place of business objects to those types of calls (most do!). Anyone collecting a business debt may not hold themselves out to be an attorney or insinuate that some sort of legal process has begun unless the legal process has in fact begun. Debtors are entitled to write a letter to a debt collector demanding that the collector cease and desist all calls, letters, faxes, and other communication about the debt. Once this right has been invoked, the debt collector must not send any additional communication unless it is a receipt of the debtor’s demand or a letter informing the debtor of the commencement of a legal proceeding.
Sacramento business lawyers recognize the right of a small business to collect any debts owed to it. However, a business can get in a lot of trouble with the federal government if its debt collection processes do not comply with the Fair Debt Collection Practices Act. Therefore, it is in every small business owner’s best interest to consult an attorney for advice as to the proper way to engage in debt collection practices.
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