A collections agency recovers unpaid invoices on behalf of a creditor. In the US, consumer collections are federally regulated under the FDCPA. B2B commercial collections are not federally regulated but may require state licensing. Commercial contingency rates typically run 15 to 35 percent of recovered sums.
A collections agency is a third party that recovers unpaid debts on behalf of the original creditor. In the US market, the category splits sharply between consumer collections, which are regulated federally under the Fair Debt Collection Practices Act (FDCPA), and commercial B2B collections, which are not.
This distinction matters for any corporate credit controller evaluating agency placement. A provider that handles consumer debt must comply with a specific federal rulebook. A provider that handles only B2B debt operates under state law and general common-law contract principles. The two business models are adjacent but not identical.
DimensionConsumer collectionsB2B commercial collectionsFederal regulationFDCPA (15 USC 1692 et seq.)NoneState licensingRequired in most statesRequired in some states (see below)Common fee modelContingency on recoveryContingency on recoveryTypical contingency range25-50%15-35%Who regulates complaintsCFPB, state AG, state regulatorsState AG for licensing, otherwise civil courtsKey constraintValidation notice, hours restrictions, no third-party disclosureGeneral commercial law; tortious interference rules
The operational description is the same across both categories. An agency receives unpaid invoices from a creditor, contacts the debtor by letter, phone, and email, pursues payment, and either collects, negotiates a settlement, returns the account as uncollectible, or escalates to legal counsel.
The differences are legal. In consumer collections, the FDCPA dictates when an agency may call, what it must disclose, what it cannot threaten, and what remedies a debtor has if the agency violates the rules. A consumer has the right to require the agency to cease contact in writing. The agency must send a written validation notice within five days of initial contact. Calls before 8 AM and after 9 PM are prohibited.
In B2B commercial collections, none of that applies. The FDCPA's scope is limited to debts arising from consumer transactions "primarily for personal, family, or household purposes." A commercial invoice between two businesses falls outside. Commercial collection agencies may call outside residential hours, may discuss the debt with colleagues or supervisors within the debtor's organization, and are not required to send a validation notice.
That does not mean commercial collectors operate without constraint. State law still applies. Tortious interference with contract or business relations is actionable. Defamation remains a civil cause. Some states require commercial collectors to be licensed or bonded.
Four state regimes are worth knowing for creditors placing US B2B collections:
New York requires collection agencies operating within the state to be licensed by the Department of State. The license applies to both consumer and commercial agencies. New York State Department of State, Division of Licensing Services handles the registration.
Texas requires a surety bond of $10,000 for collection agencies, but exempts collectors of commercial accounts from the main licensing requirements of the Finance Code Chapter 392.
Washington State operates a collection agency license under RCW 19.16, applying to both consumer and commercial collections, administered by the Department of Licensing.
Massachusetts exempts commercial collections from its consumer collection licensing regime; commercial agencies operate without a specific state license in most circumstances.
The pattern across the 50 states is that roughly 30 require some form of license or registration, most exempt commercial work from the stricter consumer rules, and the licensing footprint for a national agency is an administrative burden rather than a substantive bar.
US B2B commercial collection contingency rates run wider than the UK equivalent. The primary drivers are debt age, debtor location, and claim complexity.
Account profileTypical contingency rate0-90 days overdue, US domestic debtor, clean paper12-18%90-180 days overdue, US domestic debtor18-25%Over 180 days or post-dispute25-35%International debtor (from US creditor's view)25-40%Post-judgment enforcementTypically 30-40% or hourly
Flat-fee demand letter packages are common at $75 to $300. Above a threshold that varies by firm (often $25,000 claim value), firms transition from demand-letter packages to dedicated case handling with higher contingency rates.
Unlike the UK, which has a standardized late-payment interest regime under LPCDA 1998, the US does not have a federal commercial late-payment interest statute. Contractual interest rates in the original invoice or purchase order govern. Where no rate is specified, state-level judgment interest rates apply on amounts reduced to judgment, typically 4 to 12 percent per annum.
A common error in B2B commercial collections is assuming the agency can take any approach that a debtor has not specifically objected to. State-level tortious interference law is a meaningful constraint.
Specific practices that create exposure for commercial agencies:
A reputable commercial agency operates within the spirit of the FDCPA's general tone even where the statute does not apply. The economic reason is not ethical; it is that aggressive commercial collection tactics trigger civil countersuits that cost more than the underlying debt.
In reviewing US B2B commercial collection files placed over the past 18 months, the single strongest predictor of net recovery was claim size. Not a linear correlation; a distinct sweet spot.
The pattern suggests a placement rule: route matters under $50,000 to specialist B2B agencies on contingency; route matters above $250,000 to litigation counsel directly; for the $50,000 to $250,000 middle band, sequence agency first, litigation second, with a clear escalation trigger at day 120.
A collections agency recovers unpaid debts on behalf of the original creditor by sending demand letters, making collection calls, and either negotiating settlement or escalating to litigation. For consumer debts in the US, the agency operates under FDCPA constraints. For B2B commercial debts, general state law applies.
No. The FDCPA applies only to debts arising from transactions "primarily for personal, family, or household purposes." Business-to-business commercial debts are outside the statute. State-level tortious interference and defamation law still applies to commercial collection practices.
US commercial collection contingency rates typically run 15 to 35 percent of recovered sums, scaled to debt age and debtor location. Fixed-fee demand letter packages are commonly $75 to $300. Rates above 35 percent usually apply to over-180-day accounts or international debtors.
Not always. Many collections agencies are non-law-firm businesses operating contingency-fee recovery. Law firms operating collection practices are subject to state bar regulation and can escalate to litigation in-house. Non-law-firm agencies typically refer escalated matters to panel counsel.
The creditor places the account with the agency, usually by transmitting invoice documentation and account history. The agency contacts the debtor by letter and phone, seeking payment or a settlement. If the account is contested or unpaid after the amicable cycle, the agency either returns the matter as uncollectible or escalates to collection counsel. Successful recoveries are remitted to the creditor net of contingency fees.
A commercial invoice over 60 days past due is costing more in delay than it would cost in contingency to place. Place a case for a US B2B placement assessment within one business day.
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