Business Collection Agency: 6 Terms to Read Before Assigning an Account

The contract a creditor signs with a business collection agency governs the account more closely than any collection statute does. Commercial debts sit outside the federal consumer collection law, state licensing is uneven, and so the agency's own form agreement, usually drafted by the agency, becomes the rulebook for how the creditor's customer will be approached, what the agency may keep, and when the creditor sees its money.

Six terms in that agreement deserve a slow reading before any account changes hands. Nevada's collection agency statute is used below as the working example, because it plainly reaches business claims and states its requirements in detail; other states differ, and some do not license commercial collectors at all.

1. Assignment and Placement Are Different Transfers

An agency agreement will describe the account as either placed with the agency or assigned to it, and the difference decides who owns the claim. A placed account remains the creditor's; the agency collects as its agent. An assigned account belongs, at least on paper, to the agency, which then pursues it in its own name.

That choice has consequences a creditor may not foresee. In New York City, the Civil Court Act bars assignees from bringing small claims, so an assigned account loses that door. Nevada's statute defines a "claim" by reference to assignment, as an obligation past due "and assigned to a collection agency," which is a reminder that in the statute's own vocabulary assignment is the ordinary path into an agency's hands.

The assignment clause should also say what happens when the agency returns the account. A claim assigned out and then recalled should come back by written reassignment, not by a phone call and a spreadsheet, because the creditor may later need to prove it owns the debt it is suing on.

A creditor who assigns has also, in a practical sense, handed over its customer relationship. Some creditors want that. A distributor that expects to sell to the same restaurant again next season may not, and whether an assigned account can ever become a customer again is a question the agreement does not answer and the creditor should consider before it signs.

The recall clause belongs here as well: the right to withdraw an account, the notice required, and whether any fee is owed on money that arrives after recall.

2. The Fee Clause Should Name the Base, Not Only the Rate

Commercial agencies are often paid a share of what they collect. This page gives no percentage, because any figure would be an invention; the rate is negotiated account by account and agency by agency.

The base matters as much as the rate. The clause should say whether the fee is charged on payments the debtor makes directly to the creditor after placement, on goods returned instead of money, on credits the creditor issues to settle a dispute, and on amounts collected after the account is recalled. An agency paid on direct payments has earned something for a check it never touched.

3. Collected Money Should Sit in a Trust Account With a Remittance Date

Nevada requires what a good contract should require anywhere. Under NRS 649.355, every licensee must keep a separate account in a Nevada bank or credit union into which "must be deposited all money collected," the account must at all times contain enough to pay all money owed to customers, and collections "must be remitted to the creditors respectively entitled thereto within 30 days following the end of the month in which payment is received."

The agency holds the creditor's money for a time. The contract decides how long, and the statute, where there is one, decides how long at most.

A creditor whose agency is outside any such statute should write the remittance deadline and the trust account into the agreement itself.

4. A License and a Bond Say Something, and an NYC License Says Less Than It Appears

Nevada requires a license to engage in the business of a collection agency in the state, and its definitions carry no consumer-purpose limit, so business claims are covered. The same statute requires an applicant to file a bond "in the sum of $35,000" (as of September 2026; the section's history shows its last amendment in 2023), conditioned on the agency paying "any customer from whom any claim for collection is received, the proceeds of the collection." The required amount rises with the agency's average monthly trust balance, to $60,000 at $200,000 or more.

The bond is the creditor's backstop if the agency collects and does not pay over. It is a finite one.

New York City's license points the other way. The Department of Consumer and Worker Protection, on its debt collection agency license checklist, requires a license of businesses whose principal purpose is to collect "personal or household debts" from city residents. An agency with that license has satisfied a consumer rule. It has told the creditor nothing about business-to-business collection, and whether New York State imposes any license on a purely commercial collector is a point this page leaves to the creditor's counsel.

5. The Conduct Clause Does the Work a Statute Would Do for Consumers

The federal consumer collection statute does not apply to business debts, and a commercial collector calling a restaurant owner about a supply invoice is largely governed by the contract and by general state law. Nevada supplies one general standard, requiring every agency to "openly, fairly and honestly" conduct its business. The agreement should supply the rest: no threats the creditor has not authorized, no contact with the debtor's own customers, no representations about lawsuits the creditor has not approved, and a copy of every letter sent in the creditor's name.

And the agency is not the creditor's lawyer. When the account needs a lawsuit, the agreement should say who selects the attorney, who pays the court costs, and whether the agency's fee continues on top of the lawyer's.

6. Reporting Keeps the Limitations Clock in View

A monthly status report sounds administrative. Its real function is to show whether anything is happening while the limitations period runs, which in New York is generally six years for contract claims and four years from breach for a sale of goods.

A report that says "no contact" three months running is the signal to recall the account and call a lawyer.

When the Creditor Owes Too

Delancey Street, which negotiates for owing businesses rather than creditors, is not a law firm and sits on the other side of this relationship: it neither collects accounts nor places them. It becomes relevant when the unpaid receivable a creditor is trying to collect has left the creditor unable to keep up with its own cash advance payments. Delancey Street reviews that advance free and in confidence and coordinates with independently licensed counsel on legal questions. The agency agreement covers the money coming in. The advance covers money going out, on a schedule of its own.