Does the FDCPA apply to small businesses?

Are Small Businesses Protected by the FDCPA?

The FDCPA is a consumer protection law, the original intention of which was to shield individuals from collection agency harassment. But what about small business owners? Confusion sometimes arises regarding whether the FDCPA also protects small business owners who are delinquent on loans or charges accrued on behalf of their business. The short answer to the question is, unfortunately, no: the FDCPA does not prevent a third party collection agency from contacting an individual who has taken out a loan on behalf of their business.

According to the text of the FDCPA itself:

“Any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which, are the subject of the transaction, are primarily for personal, family, or household purposes.”

Further confusion may occur if a small business owner has used their personal credit card to purchase goods or services for their small business. Regardless of whether the card used has the name of the individual or the name of the business emblazoned on it, business purchases will still not fall within the purview of the FDCPA. A small business owner who has accumulated a debt while using their personal credit card for business purchases, and who wishes to invoke FDCPA protection to cease debt collection harassment, may have a difficult time arguing in a court of law that the purchase of manufacturing equipment and lanyard machines was intended for home use. 

For small business owners struggling with debt collection harassment, the Small Business Association (SBA) may be able to offer assistance. The SBA is a federal agency dedicated to helping launch and maintain small businesses via one-on-one help, online courses and workshops. Financial advisement and debt counseling for struggling small business owners are part of the wide variety of assistance which this agency offers. Small business owners may also choose to seek counseling through independent debt counselors. An independent debt counselor will be able to contact creditors on behalf of the business owner, and attempt to negotiate a more workable repayment plan with less punishing interest rates, and potentially lower payments via debt consolidation.