“A rose is a rose is a rose,” but not necessarily in accounts receivable management where commercial debt collections may be distinguished from their consumer counterparts. Each type is an essential component of the revenue cycle, but some clients need both services as a function of their B2B and B2C customer base. Furthermore, some agencies are qualified to collect both types of debt as described in the below comparison. There are many parameters for agencies to consider, some common to consumer and commercial collections and some unique.
Sources of Consumer and Commercial Debt
Consumer debt results from a variety of unpaid balances involving credit and store cards; medical, dental and veterinary charges; education and student loans; home mortgages; auto, medical, home and life insurance policies; energy, utilities and telecommunications; and auto loans.
Commercial debt overlaps with consumer debt on several levels including real estate loans, insurance, utilities, communications and vehicle loans, but it also entails money owed for products sold or services rendered to businesses by businesses.
According to the “Financial Accounts of the United States,” a March 9, 2017 Federal Reserve Statistical Release, American consumers ended 2016 with $14.76 trillion (including mortgages) in total debt versus $13.47 trillion for businesses.
Compliance
Consumer debt collections is one of the most regulated industries in America, and subject to a spectrum of state laws and federal regulations including the Health Insurance Portability and Accountability Act (HIPAA), Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Telephone Consumer Protection Act (TCPA) and Servicemembers Civil Relief Act (SCRA). These acts protect consumers from invasion of privacy or practices that may be considered abusive, 
unethical and deceptive while providing a means for them to stage formal complaints.
On the other hand, commercial debt collections are only regulated on the state level because government assumes businesses have a better understanding of legal boundaries. It should be noted that best-in-class agencies maintain strict house policies, including the ACA International Code of Conduct, whether they are collecting consumer or commercial debt.
Complying with federal regulations translates to a significantly greater level of training and certification for consumer collectors and managers.
Other factors to consider:
- Consumer agencies generally service a greater number of debtors than commercial agencies, but the average balance of commercial accounts is higher.
- Agencies in both sectors should be accredited by the Better Business Bureau.
- Both sides of the industry have gravitated toward contingency based collections where agencies only turn a profit if they collect for clients.
- Agencies should offer clients around-the-clock access to their accounts where they can review status and run reports.
- Effective skip tracing is essential, but more so for consumer collections where individuals change addresses and phone numbers more frequently than businesses.
- It is advantageous to work with an agency that is licensed, bonded and qualified to collect in all 50 states.
- Commercial collections requires tenacity because business are known to apply stall tactics and diversions unknown to consumers. See our article, “Commercial Collections: the Check’s in the Mail,” for a list of common excuses.
A Final Word on Consumer and Commercial Debt Collections
Acknowledging the need for compliance and certification, it is also critical for all agencies to have a solid foundation in areas such as accountability to clients and debtors, the latest data security and technology (advanced hosted dialers and interactive voice response), and a program of consumer satisfaction surveys.
If all of the above boxes are check, agencies are well on their way to offering clients a stellar return on investment as well as brand protection by safeguarding a positive public image.
Optio is an established leader in consumer and commercial debt collections. Contact us today to learn how it can help your organization achieve favorable results.
