California Commercial Collection Agency

In California, Prestige Services, Inc., is committed to providing comprehensive commercial debt collection practices for local businesses. Our practices follow the state regulation best practices in order to maintain consistency, transparency, and integrity that makes commercial debt collection so vital to financial balance.

Visit our Services page for a list of ways we can help you.

Commercial debt collection is monitored by California government entities to ensure commercial collection agencies don’t misuse their collection resources. While we have the resources for services like skip tracing and attorney forwarding, we make sure that those services don’t infringe on the rights of debtor businesses outlined by the California and United States governments.

Why California B2B Debt Collection Matters

Debt collection is a critical aspect of business operations, particularly when dealing with commercial debt. In California, the legal framework governing commercial debt collection is distinct from that of consumer debt. Commercial debt typically arises between businesses in the course of conducting business transactions, and it is subject to different rules and regulations compared to individual or consumer debt.

Unlike consumer debt, which involves individual consumers, commercial debt typically arises from business-to-business (B2B) transactions. These can include unpaid invoices for goods or services, loans provided to businesses, or other financial obligations between companies.

Key California Laws Governing Commercial Debt Collection

California Civil Code Section 3439 (Uniform Voidable Transactions Act)

California has adopted the Uniform Voidable Transactions Act (UVTA), which is designed to prevent fraudulent transfers that can hinder creditors from collecting debts. Under this law, a creditor can void transfers that were made with the intent to defraud creditors or when the debtor was insolvent at the time of the transfer. This provision ensures that businesses cannot move assets to evade debt repayment.

Read more about the Uniform Voidable Transactions Act.

California Code of Civil Procedure Sections 337 and 339 (Statute of Limitations)

The statute of limitations determines the time frame within which a creditor can legally pursue a debt. For written contracts, California law imposes a four-year statute of limitations from the date of the breach (i.e., the missed payment or default). For oral contracts, the statute of limitations is two years. After the statute of limitations expires, the creditor loses the legal right to enforce the debt through the courts, though they can still attempt to collect it informally.

Read more about the California Statute of Limitations.

California Business and Professions Code Section 17200 (Unfair Competition Law)

Although primarily aimed at preventing unfair business practices, this section can be invoked in commercial debt collection cases where a creditor or debt collector engages in fraudulent or unfair practices. If a creditor engages in unlawful practices while collecting a debt, the debtor can bring a claim under this section.

Read more about the Unfair Competition Law.

California’s General Laws on Contracts

Commercial debt collection also falls under the general contract laws of the state, which include the enforcement of contractual obligations and the determination of damages for breach of contract. A valid written or oral agreement forms the basis for commercial debt collection in California, and the terms of the contract will guide the creditor’s legal recourse.

Interest and Late Fees

California law also provides guidelines for charging interest on unpaid commercial debts. In the absence of an agreed-upon interest rate between the parties, the statutory interest rate in California is 10% per annum for written contracts and 7% for oral contracts. Creditors should ensure that any interest or late fees charged on overdue payments comply with the terms of the contract and California’s statutory limits.

Judgment Enforcement (Writs of Execution, Garnishments, and Liens)

If a creditor obtains a judgment against a debtor in California, they can take steps to enforce it through various methods such as garnishing wages, levying bank accounts, or placing liens on the debtor’s property. California law provides a detailed process for enforcing judgments, including obtaining a writ of execution from the court. However, certain assets may be exempt from judgment enforcement, such as homesteads or personal property protected by California’s exemption laws.

Check Laws by Cities in California

SUMMARY OF CALIFORNIA COLLECTION LAWS*

CALIFORNIA HAS COMMUNITY PROPERTY LAWS

INTEREST RATE
Legal: 10% – Judgment 10% (Unless otherwise contracted)

STATUTE OF LIMITATIONS (IN YEARS)
Open Acct: Reduced to writing – 4 – Open Acct: No writing – 2 – Written Contract 4 – Domestic Judgment 10 (renewable at 10)
– Foreign Judgment 10 (commencing with judgment debtor’s commencement of CA residence)

BAD CHECK LAWS (CIVIL PENALTY)
Amount due, Treble damages – minimum $100 maximum $1500 per check

GENERAL GARNISHMENT EXEMPTIONS
See federal law. Exemptions for necessities of life.

COLLECTION AGENCY BOND & LICENSE
No license or bond required.

* These are not comprehensive statutes and therefore PSICollect.com and Prestige Services, Inc. disclaims any liability resulting from reliance by any party upon the legality and accuracy of the contents thereof.

Collection Best Practices from Prestige Services, Inc.

Given the complexities of commercial debt collection in California, businesses must adopt best practices to ensure compliance with state laws and minimize the risk of legal disputes. Here are some key strategies to follow:

1) Draft Clear and Enforceable Contracts

The foundation of any commercial debt collection effort is a clear, detailed, and enforceable contract. Contracts should specify payment terms, including due dates, late fees, and interest rates. Ensure that both parties understand and agree to the terms of the contract. The clearer the contract, the easier it is to pursue debt collection in case of nonpayment.

2) Maintain Accurate Records

Keeping detailed records of all transactions, communications, and attempts to collect unpaid debts is essential. Accurate records can provide evidence in court if a debt collection case becomes litigious. These records should include signed contracts, invoices, payment histories, and all correspondence with the debtor.

3) Send Formal Demand Letters

Before taking legal action, it is standard practice to send a formal demand letter to the debtor. A demand letter typically outlines the amount owed, the due date, and any interest or fees that have accrued. It also notifies the debtor of the creditor’s intention to take further legal action if the debt remains unpaid. While not legally required, demand letters often serve as a final attempt to resolve the debt without litigation.4

4) Consider Mediation or Arbitration

Many commercial contracts include clauses that require mediation or arbitration before pursuing litigation. These alternative dispute resolution methods can be faster and more cost-effective than going to court. Mediation involves a neutral third party who helps facilitate a settlement, while arbitration results in a binding decision from an arbitrator.

5) Know When to Litigate

If informal methods of debt collection fail, litigation may be necessary. Businesses should consult with an attorney who specializes in commercial debt collection to determine the best course of action. Filing a lawsuit can lead to a court judgment, which the creditor can then enforce through garnishments, levies, or liens. However, litigation can be costly and time-consuming, so it should be viewed as a last resort.

6) Comply with Federal and State Laws

Even though the FDCPA does not apply to commercial debt collection, it is still wise for creditors to adopt fair and transparent practices. Aggressive or unethical collection tactics can lead to legal challenges under California’s Unfair Competition Law. Creditors should avoid harassment, threats, and deceptive practices.

Contact Prestige Services, Inc.

The use of professional debt collectors can benefit businesses by providing expertise in negotiation and settlement and reducing the likelihood of legal missteps that could result in penalties or damage to the business’s reputation.

As an award-winning commercial debt collection agency licensed in California, Prestige Services, Inc., offers a variety of exceptional debt collection services to help businesses get money that is owed to them.

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