The aging report shows a six-figure A/R balance. How does Washington law treat portfolio collection?
Portfolio-style accounts receivable collection raises issues that single-invoice files do not. If the receivables are being collected by the original creditor on its own debt, the standard collection statutes apply (RCW 4.84.330 reciprocal fees, RCW 19.52.010 default interest, RCW 19.16.250 limits on charges). If the receivables have been assigned to a third party for collection, or sold outright, Chapter 19.16 RCW (the collection-agency licensing chapter) becomes the controlling regime. Most original creditors do not need a collection-agency license; assignees and third-party collectors generally do. The licensing question is not a side issue: collecting under an unlicensed regime when one is required can void the recovery and create a counterclaim. This page walks the two regimes and the standard portfolio-letter structure.
Original creditor vs assignee
An original creditor collecting on its own debt is not a "collection agency" under Chapter 19.16 RCW and does not need a license to send a demand letter or to sue. The original creditor still must comply with RCW 19.16.250 limits on what may be charged (interest at the contract or statutory rate, allowable late fees, and court costs or attorney fees recoverable by statute or contract), but the licensing chapter does not require registration.
An assignee that takes assignment of the receivables for the purpose of collecting them, or a third-party collection agency hired to collect, generally must be licensed in Washington under Chapter 19.16 RCW. Operating as an unlicensed collection agency is a per se Consumer Protection Act violation under RCW 19.16.440. For a small business considering assigning its A/R portfolio to a collection agency, verify the agency's Washington license before sending a single account.
RCW 19.16.250 limits on charges
RCW 19.16.250 sets specific limits on what may be charged to a debtor by a collection agency or assignee. Permissible charges include:
- Interest at the rate set by the underlying contract (subject to the RCW 19.52.020 ceiling) or at the 12 percent default rate under RCW 19.52.010 if no rate is written.
- Late fees if the underlying contract supports them.
- Court costs and attorney fees recoverable by statute or contract.
Charges that fall outside that list are unlawful. A demand letter that adds "collection costs," "administrative fees," "skip-tracing fees," or any other line item the contract does not authorize is itself a potential statutory violation. The original creditor that pads its own collection letters with these line items also weakens its position; the debtor can use the padding as both a defense and a counterclaim.
The federal FDCPA overlay on consumer debt
If the receivables are consumer debts (incurred for personal, family, or household purposes), a third-party collector or assignee is also subject to the federal Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. The FDCPA requires specific validation notices, regulates communication times and methods, and creates statutory damages for violations. The FDCPA does not generally apply to the original creditor; it applies to "debt collectors" as defined in the statute. For B2B accounts receivable, the FDCPA generally does not apply. Verify the debtor classification on each account before drafting.
What the portfolio collection letter (or per-account letter) should do
- Identify the original creditor and (if applicable) the assignee or collection agency, with the license number if licensed.
- Identify the underlying contract(s) and attach the relevant document(s).
- State the principal balance, partial payments with dates, and the per-account or aggregate balance.
- Calculate interest under the contractual rate or RCW 19.52.010, with per-diem.
- Limit any added charges to what RCW 19.16.250 authorizes; do not pad with collection costs or administrative fees not in the contract.
- Cite RCW 4.84.330 if the underlying contract has a fee clause, or the offer-of-settlement statute for sub-$10,000 accounts.
- For consumer debt being collected by a third party, include the FDCPA validation notice and any state-required disclosures.
- Demand payment of the per-account or aggregate balance by a specific date, 15 business days from the letter.
- Send certified mail to the debtor's registered agent (entity debts) or last known address (individual debts), plus email where available.
Portfolio sale vs assignment for collection
Selling the portfolio outright (assignment with title transfer) and assigning for collection (the original creditor retains title; the agency collects in the creditor's name) are different transactions with different licensing and tax implications. Selling at a discount cleans the books and shifts collection cost off the original creditor, but the sale price is usually a small fraction of face value, the buyer keeps the upside, and the original creditor loses control over how the debt is pursued. Assigning for collection retains the upside if the agency succeeds and preserves the creditor's brand and customer relationship, but the creditor remains the named plaintiff in any subsequent action. The right choice depends on volume, age of receivables, customer-relationship sensitivity, and the licensed-agency landscape.
Documents to upload before the letter goes out (or before assignment)
- The aging report with principal and any partial-payment record per account.
- The underlying contracts for each material account.
- The invoices and statements of account in original form.
- Any guaranty documentation per account.
- For consumer debts, the original consumer agreement and any prior dispute or validation request.
- Any prior collection communications already sent on each account.
- If considering assignment: the Washington license verification for the proposed assignee.
When this becomes worth hiring an attorney
- Aggregate A/R balance above roughly $25,000 across multiple accounts.
- A handful of larger accounts ($5,000+) that justify individual attorney-letter treatment alongside agency or self-collection on the smaller balances.
- Receivables that include personal guaranties, secured collateral, or other recovery-enhancing structure.
- A portfolio with mixed B2B and consumer debt where the FDCPA classification needs counsel review.
What I review when you send the file
I read the aging report first to identify the larger and stronger accounts (typically the top 10 percent of accounts that hold the majority of the balance), then the underlying contracts on those accounts to confirm the fee-recovery posture and any guaranty. I form a view on whether to send attorney letters on the priority accounts and assign the long tail to a licensed collection agency, or whether the file is best sold outright. The output is a written evaluation.
Primary sources
- Chapter 19.16 RCW: collection agency regulation.
- RCW 19.16.250: limits on charges by collection agencies and assignees.
- RCW 19.16.440: unlicensed-collection-agency activity as a per se CPA violation.
- RCW 4.84.330: reciprocal attorney-fee statute.
- RCW 19.52.010: 12 percent default interest.
- 15 U.S.C. §§ 1692 et seq.: federal Fair Debt Collection Practices Act.
This page is an educational resource. Sergei Tokmakov is a California attorney (CA Bar #279869) currently seeking admission to the Washington State Bar.