Commercial Collection Trends—Increasing Debt but Also Increasing Difficulty in Collecting It

Commercial collection trends have changed over the years, and at present, are experiencing a shift that is both good and bad for the industry.  The good is that as the economy continues to lack stability, businesses are failing—particularly those related to the travel and tourism industry.  With this decline in consumer activity, the commercial debt sector is increasing, with more accounts to collect on; the bad news is that these accounts are even more difficult to collect on than many personal consumer accounts.

 

According to a survey completed by the Commercial Collection Agency Association (CCAA), “the probability of full collection on a delinquent account drops dramatically with the length of delinquency.”  The examples they show are striking: after three months, the likelihood of collecting on a delinquent commercial account drops to 69.6%.  After six months, this number goes down even further to 52.1%.  After one year, the collection agency or debt collection attorney can expect a 22.8% probability that any money will be collected on that commercial account.

   

According to another survey conducted by CCAA, 80 percent of its members surveyed “indicated that they have experienced a decline in the collectability of accounts placed with them for collection.”  This, again, is a result of an unstable economy and might not taper to a more promising outlook for quite some time.  Since the economic downturn and recession of 2008, many small business owners who have been struggling to hang on by dipping into their life’s savings or personal retirement accounts have now reached the end of their cushion and are now simply unable to make things work for their business.   

While this certainly doesn’t mean the commercial debt collection sector is a waste of time, what it DOES mean is that commercial debt becomes just as difficult as personal debt to pin down.  Business owners are changing their business name or starting a completely different business, thus making it even more difficult for debt collection attorneys to collect on their old debt.