What are creditors’ rights in Ohio?

Businesses in Ohio trying to collect on a debt should be aware of their rights as well as what constitutes illegal activity.

A creditor is often thought of as a collection agency, but in truth, any business in Ohio that is owed money from an individual or another company can be viewed as a creditor. Fortunately, the law extends several rights to creditors who are trying to collect on that debt. Knowing what those rights are as well as what constitutes illegal activity is essential to keeping a business in good standing, financially and otherwise.

Possible remedies

The first and simplest method for recovering a debt is for the creditor to contact the debtor and let him or her know about the situation. The creditor may make several such attempts before sending the person's account to an entity that specializes in commercial collections.

Other possible remedies include the following:

  • Working in secured transactions so the creditor can seize property in the event of delinquent payments
  • Taking replevin action, through which the creditor holds the title to property and can take it back
  • Seeking an attachment, through which the court permits the creditor to seize property

If these actions fail, then it may be necessary for the creditor to file a lawsuit against the debtor. These judgments, when in favor of the creditor, typically enable the business to take property from the debtor to cover the cost of the debt. It is also possible to place a lien on a debtor's property.

In extreme circumstances

There is also the option of forcing the debtor into involuntary bankruptcy. This typically occurs when the party in question is seriously indebted to a number of creditors. The creditors would have to petition the court. Upon approval, the debtor would either put together a reorganization plan that would seek to satisfy the debts, or he or she would have to liquidate property.

Rules for collection agencies

Many of the actions above are taken when there is a secured debt, which makes seizing property simpler. In cases in which the debt is unsecured, many businesses seek the help of a debt collection agency. These agencies must abide by the rules set forth under the Fair Debt Collection Practices Act.

For example, collection agencies may not place harassing phone calls, use threatening or obscene language or misrepresent the debt that is owed. Debt collectors are not allowed to make false statements, such as trying to convince a debtor that he or she committed a crime or that the person will be arrested for not making payments.

As the Ohio Attorney General points out, the FDCPA applies to debt collection agencies and other entities that regularly collect debt, such as attorneys who help businesses secure repayment. It does not, however, apply to the original creditor.

New agency regulating debt collectors, including lawyers

After the recent recession, a new federal government agency, the Consumer Financial Protection Bureau, was created to protect consumers from abusive practices in the consumer financial services industry, including debt collection practices.

Third-party debt collectors, including law firms that collect debts for clients, must monitor the CFPB's enforcement and regulatory activity to comply with developing requirements. For example, an article in Lexology describes an agency consent order with a law firm requiring lawyers to adequately document, investigate and certify third-party debts before filing collection lawsuits. The order restricts the attorneys from discovering debtor information in these suits for use in collection efforts after obtaining judgments.

It is imperative for businesses that are owed money to work with the right people in order to abide by the law while recovering funds. Businesses with concerns about this topic should speak with an attorney in Ohio.