Common Mistakes In Commercial Collections

March 15 2019| News| | By Okin Adams

It is no secret that one of the most disfavored aspects of operating a business is the collection of debts owed to the company. The process is tedious and time-consuming, and mistakes along the way can cause delay and trigger unwanted liability exposure.

Knowing how to avoid these situations and having an experienced collections lawyer by your side can help make the process both bearable and fruitful. Here are two key mistakes to avoid making when retaining a professional to collect corporate debt:

Not Knowing the Difference Between Commercial and Consumer Collections

Ensuring that a business appreciates the distinction between these two types of collections is essential when commencing the collections process. Commercial collections focus on the collection of outstanding debts owed to a business by another business, or by an individual for a business-related debt. Consumer collections focus on collecting debts from individuals that were incurred for a personal, family, or household purpose. There is a vast difference in the regulation of these two forms of collections, and retention of a collections professional who is without knowledge of the distinctions could spell disaster.

Knowing When to Use a Collection Attorney Rather Than a Collection Agency

As they often work on a high-volume basis, collection agencies typically rely on little more than sending out collection letters to account debtors. These are often mailed out in batches pursuant to a set schedule. Some agencies follow the letters up with phone calls (frequently “robo-calls”), but will often cease aggressive activity on the creditor’s behalf when success begins to appear doubtful or difficult to achieve. As such, tasking a collection agency with a sizeable—yet difficult to collect—debt can sometimes be a costly mistake.

As compared to a collection agency, a collections attorney has the ability to provide the client with more individualized and personal attention. In this regard, a collections attorney can offer the client a broad portfolio of options, ranging from less aggressive debtor communication strategies to the filing and pursuit of litigation. However, one note of caution—as with any professional, collection attorneys expect to be compensated for their efforts. As a result, a business should consider the size of the debt at issue—and the financial wherewithal of the debtor—when deciding whether to retain an attorney to conduct the collection efforts. While some forms of debt will permit the recovery of attorneys’ fees if the creditor prevails at trial, it is usually unwise to count on such a recovery given that most litigation disputes are settled or are otherwise resolved prior to the trial portion of the case.

Experienced Houston, Texas Commercial Collections Attorneys

At Okin Adams, our experienced attorneys have helped small businesses with single unpaid debts and Fortune 500 companies with large collection matters. We provide pre-suit, litigation and post-judgment legal services for the collection of commercial debts.