Outstanding debts to business organizations are collected through a standard procedure that begins with the monthly invoice and ends in a court of law. Each step is closely regulated by consumer-protection and trade laws written by federal and state legislators.
Invoicing
When they provide goods or services to customers and clients, businesses issue printed invoices or bills in order to secure payment. The invoice lists the date, type of goods or service provided, cost of these goods or services, and date the payment is due.
Direct Contact
The debtor returns a copy of the invoice along with the payment. If the debt goes unpaid, the business will contact the customer and try to make a payment arrangement.
Collections
If still unsuccessful, the business can hire the services of a debt collection agency. The agency may contact the customer and demand payment; if the payment is received, the agency keeps a percentage for its service and forwards the balance to the original creditor.
Restrictions
According to the Fair Debt Collection Practices Act (FDCPA), collectors may not use abusive, unfair or deceptive practices to collect. They must send a validation notice within five days after the initial contact. Debtors have the right to contest the debt within 30 days.
Litigation
The business may also file a lawsuit in civil court to collect the debt. If the court decides in favor of the creditor, the creditor then has the right to seize assets, such as a car or other properly, used to secure the debt.
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