Debt collection is a process through which a company owed a debt seeks repayment, whether from an individual or a business. The practice of debt collection is usually undertaken when payment on the outstanding debt is overdue. Commercial debt collection applies to cases in which the debt pursued is owed by a business. Often the collection process is handled by a debt collection agency, though some large companies maintain their own debt collection department. Debt collections are often strongly pursued, and the practices of debt collection agencies vary greatly internationally.
When an individual or business owes an outstanding debt on which payment is past due, the company owed the debt will often decide to pursue collection on the outstanding amount. Generally, a company will send a notification of an overdue outstanding amount before acquiring the services of a third-party debt collection agency. The most common type of debt collection is for late payment on credit card accounts, although debt collection agencies, or factions of companies, also collect late payments on all types of loans and various other types of payments. Debt collection agencies are notoriously aggressive, due to their payment for services rendered often hinging on successful collection, and there are a history of debt collection lawsuits in response to debt collection harassment.
Commercial debt collection refers specifically to the collection of a debt owed by a business to another business or financial institution. The practices of commercial debt collection may be pursued in a somewhat different manner depending on the resources and available assets of the debtor business and the type of business in question. Many businesses that are subject to commercial debt collection will retain the services of a debt collection attorney to represent them throughout the process.
Third-party collection agencies, once their services are retained by a business, begin the collection process by making phone calls to the debtor; in addition, they may send written notification letters. The processes for collection vary greatly depending on the legislation regarding debt collection in the country in question. Commercial debt is often considered more complicated than consumer or retail debt, and collectors often try to work with businesses to come to a mutually agreeable solution. Some methods of commercial debt collection include repeatedly contacting the debtor, trying to negotiate a settlement, and, if these methods are unsuccessful, filing a lawsuit.
Pursuit of commercial debt may include additional methods of collection depending on the type of debt and, again, national legislation. Another practice of debt collection involves debt purchasers. These companies purchase debt from the business owed the debt at a discounted rate and pursue collection of the full owed amount for profit.