California is not only a liberal state, it’s a tricky state to retain the collections services of a California collection agency. For starters, unlike debt collection companies like Industrial Credit Services, California does not require a collection agency to be bonded or even licensed.. Basically, that means anyone over the legal age can open the doors to a new commercial collection business, put a name on a front door window and bingo – you are in business. While this may be a green light to do business for this particular agency, a commercial client doesn’t really know who they are doing business with, unless they are dealing with a prospective agency that has already been screened and licensed in another state as a responsible collection agency like Industrial Credit Services in Oregon..
If an unlicensed commercial connection agency does something stupid, it’s possible that you may suddenly be liable for their actions – Ouch!
Dealing with reputable commercial collection companies like Industrial Credit Services most will carry a million in liability insurance and an additional million in E&0. All that said, perhaps this article should shed a little light on California laws and regulations that not only affect debt collection, but commercial collections, as well.
California Collection Interest Rates
- California legal rate is: 7 percent per annum – without a written contract. With a contract the rate jumps to 10 percent annum.
- Credit Agreement is 21 percent per annum
- Judgment Rate is 10 percent per annum
- Usury o/o Cap for commercial loans
Note: In California, a collection agency can only apply or charge interest rates as shown above.
California Statute of Limitations
- An oral contract will expire in two years.
- A written contract will expire in four years.
- An open account agreement will expire in four years
- A judgment action must be commenced within 10 years
The State of California does have a Commercial Collection Association that has a code of ethics that all members must abide by..
- Potential members must be a collection agency with an office in the state.
- Other than being located in the State of California , the agency must currently be in good standing.
- Any potential members must have been in business in California for a minimum of one year.
- All members must solicit primarily commercial claims (non-consumer)
- All representatives must be either an active principle or a designee of the active principal..
- Dues will be charged and no person will be denied membership on the basis of sex, color,, or race. Annual dues shall include a $50 dollar non-refundable processing fee.
Under state law, California does not have exemptions, but it does have to abide by Federal Law when it comes to the Fair Debt Collection Practices Act of 1977 and added to the Consumer Credit Protection of 1978, Like other states in this country, the purpose of the FDCPA is to eliminate abusive practices of third party collectors. that had run rampant for decades back in the early days of the 1950’s , 1960s and most of the 1970s. To that end, the Act established firm guidelines for the conduct of debt collectors and also defined the rights of consumers while at the same time, prescribing penalties for violations. The new FDCPA law defined debt collectors as any person who uses any instrument of interstate commerce or the mail for the purpose of collecting a debt – asserted to be owed or due to another, What all this verbiage really means is that debt collectors, companies like Industrial Credit Services and even those in the law business collecting debts on a regular basis. Consumers and debts covered under the FDCPA are defined as specially targeting personal, family or household transactions. That said, debts owed by a business or by an individual person for business purposes like a commercial debt, are not subject to a slap-on-the-wrist by the Fair Debt Collection Practices Act.
Note: In California there are no U. S. federal laws on the books, similar to the FDCPA that regulate third party commercial business-to-business debt collection or provide guidelines for the conduct of any type of commercial debt collections. However, local Commercial Collection Agencies Associations do exist in California ( CCAA).