Commercial collections across borders: reflections on the international situation

I recently attended a fascinating conference – the International Association of Commercial Collectors (IACC) conference – which was held in the USA last week. There were so many jurisdictions represented, each with their own particular rules and regulations, though for the most part, as in the UK, the financial regulator tends to focus predominantly on consumer credit matters. Nevertheless, I came away having gleaned at least a dozen lessons and observations, some more straightforward than others:

Consumer-style protections expanding into commercial lending

The degree to which consumer credit protections and regulations are extending across business and commercial loans is very much an international discussion – with an increasing array of commercial loans gradually being “covered” by equivalent consumer rules. For example, in California their Rosenthal Act provisions are now extending to guarantors of debt below $500k for non personal use, protecting from what is perceived as more ‘aggressive’ collection practices. Where the line is drawn is a point of contention; in the US “financing” and business credit cards are ‘covered’. If covered, then everything becomes regulated conduct: communications must meet FDCPA standards, disputes trigger pauses and investigations, and collectors must become licensed.

Flowing from this, commercial debt purchase is under scrutiny for the timing of “assignment” of the debt – just as with consumer credit sold to a debt purchaser – because the rules of what is and isn’t “covered” debt change over time and so the date of assignment becomes crucial.

Risk tolerance and litigation exposure for collectors

Commercial collectors are considering their risk tolerance if the risk that debts placed with them are going to ensnare them in litigation or compliance under consumer protection rules. This is understandable, but raising risks can raise costs for all concerned.

However, higher regulation isn’t always “bad” for some UK commercial collections specialists: with such disparate regulatory arrangements and elephant traps worldwide, UK firms are sometimes able to promise high “FCA style” standards and practices, which ironically can be appealing to creditors who want full assurances that the highest standards and compliance quality thresholds will undoubtedly be met. UK commercial collectors working cross border can offer that level of high professional standards that can out compete firms elsewhere who may not meet such standards.

Operational challenges in remote and hybrid commercial collections teams

There was much discussion about bread and butter practicalities of running a collections business. For instance, most commercial collections firms, especially in the US, are dispersed with either fully remote or hybrid arrangements. Communications between frontline teams is emphasised more because of this remote working – to counteract isolation, building team cohesion is a particular focus. High quality project management software to coordinate all this is also extremely important.

Evolving skillsets: empathy, problem solving, and client awareness

In terms of commercial collections training and skills, there is a growing emphasis on qualitative factors of professionalism, such as empathy and problem solving capabilities. Understanding the client’s motives is also a key skill. Sometimes creditors or other clients can be pursuing a debt for an emotional rather than a hard headed business reason. So commercial collectors need to be able to listen, counsel, and advise clients in the right way.

Jurisdictional differences in statute of limitations

The statute of limitations for commercial collections varies across different jurisdictions, e.g., five years in Florida whether consumer or commercial debt, or zero limits in the Far East. This, of course, can change recovery strategies significantly!

Cross border litigation: risk, cost, and local expertise

When a claim is disputed, assessing the risks of counterclaim litigation can depend on the determination of the customer and potential costs. In highly litigious societies (such as the US) this is a real consideration. And of course, the high costs of recovery can make collecting small sums simply not worthwhile.

Navigating international cross border litigation and collections challenges means linking with local specialists, understanding varying statute of limitations, and being pragmatic about the threshold of the sum owed and viability of collection. There are also advantages to enforcement of judgements rendered by domesticating foreign judgments made in the home jurisdiction.

Growing uncertainty around AI enabled debtor interactions

When collection agencies or creditors use AI for debtor dialogue, there is uncertainty about the ways in which companies are authorising the AI agent to make repayment offers and settlements. Policies on this remain uncertain.

Emerging international hot topics

Other “hot topics” in commercial collections internationally currently include:

• Deployment of AI by firms, clients, and customers

• Occasional settlement offers in cryptocurrency

• Use of texting and SMS/WhatsApp for communications, and the degree to which some jurisdictions restrict ‘mass communications’ to cap frequency

• Recruitment challenges into collections careers

• How to motivate remote employees and patterns of hybrid working

Shared challenges across borders

Although the IACC Convention was quite US oriented, the lessons for commercial practices in the UK were clear. Those attending from UK firms came away not just with useful networks but also a sense that wherever your firm may be based, many of the challenges are held in common.