Commercial Debt Collection Statutes for Pennsylvania

Commercial-Debt Collection Statutes for PENNSYLVANIA:

PENNSYLVANIA–Definitions

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

“Debt.” An actual or alleged past due obligation, claim, demand, note or other similar liability of a consumer to pay money, arising out of a single account as a result of a purchase, lease or loan of goods, services or real or personal property for personal, family or household purposes or as a result of a loan of money or extension of credit which is obtained primarily for personal, family or household purposes, provided, however, that money which is owed or alleged to be owed as a result of a loan secured by a purchase money mortgage on real estate shall not be included within the definition of debt. The term also includes any amount owed as a tax to any political subdivision of this Commonwealth. Tax includes an assessment, any interest, penalty, fee or other amount permitted by law to be collected. Debt does not include any such amount owed to the United States or the Commonwealth.

“Debt collector.” (1) A person not a creditor conducting business within this Commonwealth, acting on behalf of a creditor, engaging or aiding directly or indirectly in collecting a debt owed or alleged to be owed a creditor or assignee of a creditor. 73 Pa. Cons. Stat. Ann. § 2270.3(1) (West, WESTLAW through Act 2007-77).

PENNSYLVANIA–Exemptions

“Debt collector.”

(2) The term does not include:

(i)         Any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor.

(ii)        A person while attempting to collect a debt on behalf of a creditor, both of whom are related by common ownership or affiliated by corporate control, if the person acting as

a debt collector does so only for creditors to whom it is so related or affiliated and if the

principal business of the person is not the collection of debts.

(iii)       A person while collecting or attempting to collect any debt owed or due or asserted to be owed or due to another to the extent such activity:

(A) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;

(B) concerns a debt which was originated by such person;

(C) concerns a debt which was not in default at the time it was obtained by such person;  or

(D) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.

(v)        A person who is an elected or appointed official of any political subdivision of this Commonwealth, who collects or attempts to collect a tax or assessment owed to the political subdivision which employs the person, while that person is acting within the scope of his elected or appointed position or employment.

(3) The term does include:

a.   A creditor who, in the process of collecting his or her own debt, uses a name other than his or her own which would indicate that a third person is collecting or attempting to collect the debt.

b.   An attorney, whenever such attorney attempts to collect a debt, as herein defined, except in connection with the filing or service of pleadings or discovery or the prosecution of a lawsuit to reduce a debt to judgment.

c.   A person who sells or offers to sell forms represented to be a collection system, device or scheme which is intended or designed to collect debts.

d.   A person, other than an elected or appointed official of any political subdivision of this Commonwealth, who collects or attempts to collect a tax or assessment owed to any political subdivision of this Commonwealth.

73 Pa. Cons. Stat. Ann. § 2270.3(2)-(3) (West, WESTLAW through Act 2007-77).

What is the Fair Debt Collection Practices Act?

The U.S. Congress enacted the FDCPA in 1977 and added it to the Consumer Credit Protection Act in 1978. Its purpose is to eliminate abusive practices of third-party debt collectors. To that end, the Act establishes guidelines for the conduct of debt collectors, defines the rights of consumers, and prescribes penalties for violations.

The FDCPA defines “debt collectors” as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debt … asserted to be owed or due another.”

In other words, “debt collectors” are defined as third parties collecting for a creditor. (As of a 1986 amendment, the FDCPA definition of “debt collector” also includes attorneys who collect debts on a regular basis.)

“Consumers” and “debt” covered under the FDCPA are defined as specifically referring to personal, family or household transactions. Therefore, debts owed by businesses or by individuals for business purposes (commercial debts) are not subject to the FDCPA.

So, if the FDCPA does not apply to commercial debt collection by third parties, how are commercial collectors regulated?

There are no U.S. federal laws, similar to the FDCPA, that regulate third-party commercial (business-to-business) debt collection or provide guidelines for the conduct of commercial debt collectors.

Who is protecting the rights of commercial creditors and debtors?

Commercial Collection Agency Association

The premier body governing the activities of commercial debt collectors is the Commercial Collection Agency Association (CCAA), an arm of the Commercial Law League of America (CLLA). These organizations are not government bodies, nor do they have any jurisdiction over non-members.  However, both require high standards of practice and ethics in order for a commercial collection agency to become a certified member.

The Commercial Collection Agency Association was established in 1972 to “improve the quality and reputation of the commercial collection industry.” It currently has more than 200 members. Approximately 100 core members represent the most prestigious commercial collection agencies in the United States.

The CCAA is an arm of the Commercial Law League of America (CLLA), the oldest creditor’s rights organization in the country established in 1895.

Membership in the CCAA

Members of the CCAA are the only collection agencies in the United States certified by the Commercial Law League of America. In order to obtain certification, the agency must meet rigorous criteria.

Certification Requirements

• The agency must have been in business at least four years prior to application for membership.
• 80% of the agency’s business must be commercial (business-to-business).
• The agency must maintain a separate Trust Account into which all monies belonging to creditors are placed. This Trust Account is reviewed twice annually by the Executive Director of the CCAA.
• The agency must agree to abide by the CCAA Code of Ethics, which sets ethical standards for dealing with creditors, debtors and attorneys.
• Executives of the agency must meet continuing educational requirements and attend regular CCAA meetings. The member agency must complete sixty continuing educational credits annually.
• The agency must post a surety bond of at least $300,000 for the protection of the creditors it serves.
• One person in the agency must also be a member of the Commercial Law League of America.
• The agency must agree to random periodic site visits from the CCAA Executive Director.
• The agency must be in compliance with all local and state licensing requirements and regulations governing commercial collection firms.

 Primarily, the Commercial Law League of America and its Commercial Collection Agency Association have assumed responsibility for looking after the needs and rights of creditors and their customers/debtors. State governments that require licensing and bonding of commercial debt collectors also play an important role.

However, since membership in the CCAA is not compulsory, and some firms may provide collection services in a state but never get licensed, it is up to creditors to ensure they (and their debtors) are receiving the most ethical and highest level of commercial collection service.

How? Check to see if your Agency is both a member of the Commercial Collection Agency Association and therefore certified by the Commercial Law League of America, and is licensed in the U.S. states requiring such licensing.

Burt And Associates is a member of both CCAA and CLLA.  Also, we are licensed in bonded in all 50 states (where required).