Collection services are provided by specialised debt recovery agencies, which recover delinquent amounts and past-due debts. Debt collection services can vary depending on the DCA’s (Debt Collection Agency) policy. Usually such agencies offer the full package of recovery services- from tracking and tracing the debtor, through the pre-legal process, methods of communication, to court actions, if necessary. Debt collection agencies interact with debtors by means of different communication methods and contact them on behalf of the original creditor. The collection services can be paid, partly-free or completely free. Some agencies offer free pre-legal and legal actions; some require payment only for the legal actions. Most of the DCAs will not charge their client unless the amount is collected, i.e. the so-called policy of no collection, no fee; but some recovery agencies can require payment in advance on a monthly or on an annual basis.
Need and use of collection services
Debt collection services are required when there is a late payment or a past-due debt. According to most laws, a payment is considered as late 30 days after the invoice has been sent to the customer, or after the goods or services have been delivered to the client. Subsequently the consumer officially becomes a debtor. The late payment period can vary and depend on debtor’s current residence, but typically it is between 30-60 days.
Creditors prefer recovery services offered by professional debt collectors because DCAs (Debt Collection Agencies) are more prosperous than creditor’s internal departments for debt collection. This is explained with the fact that the recovery agencies offer professional recovery services including pre-legal, legal actions and specialised collection methods and tools. It is a common misbelief that using experienced recovery agents will be more expensive financial funds’ consuming. Recent researches have proved that using a DCA may cost money (of the DCA requires payment from the creditor) but it will be cheaper, compared with the usage of internal subdivisions, as a collection agency will save creditors valuable time and financial resources. Some debt collection agencies take their commission fee from the debtors, which is more cost-saving for creditor’s company.
Debt collection services list
After the creditor hires a DCA, he will transfer all delinquent accounts to the agency. A debt recovery agency can provide its clients with a range of collection services:
Credit control
If the creditor decides to leave the late invoice process to a collection agency, the same agency will provide such credit control service. This will save creditor’s company time and additional costs from chasing overdue invoices and bad debts.
Immediate pre-legal actions
- Tracing: Sometimes the debtor might be difficult to find, either because of an address change or because a false one has been given. As first step of the debt collection process is considered the track & trace method;
- Multichannel communication tools and methods: phone, email, fax and letter contact. These methods are proceeded by legal and ethical means, as debt collection agencies strive to preserve creditor’s reputation and good name;
- In-house personal visits by authorised representatives (standard debt collectors, enforcement agents or bailiffs): These recovery agents visit debtor’s property and either try to arrange a convenient payment plan for the subject of debt, or offer to sell part of debtor’s belongings in order to cover the default amount and settle the debt in full;
- Different letters of demand: Depending on the phase of collection, the letters can be either informative (suggest payment to be done as soon as possible) or warning (informing the debtor that legal actions will or have already begun as a result of not settling the debt in time);
Legal proceedings
A debt collection agency can also provide subsequent litigation collection services, if the pre-legal actions have not been successful. The case is transferred to court and court attorneys will contact the debtor. The DCA (Debt Collection Agency) continues to monitor the process in case the debtor decides to pay before the end of the legal proceedings. Some collection agencies offer free legal debt recovery services or require payment from the creditor only after the successful collection of debt amount. Usually collection agencies offer free court proceedings for their clients, only if the scoring of the DCA shows that the case can be won. If it is the opposite way, but the creditor still insists on legal actions, he will be obliged to pay for them, if DCA loses the case in court.
Recovery agencies can also offer company status check recovery services for creditor’s corporate business deals. If the creditor decides to start business with a new partner, the collection agency performs a thorough security check to ensure that the new partner is solvent. Such checks minimise the risks of potential debtors.
Monitoring services can be available as well. This is the surveillance process of old debtors, which minimises the risk of new debts occurrence. Specialised team monitors and screens all accounts for potential bad debts.
All debt collection services and methods are regulated by the laws of the country of operation. DCA’s actions are always in compliance with different acts and regulations (e.g. the FDCPA- Fair Debt Collection Practices Act for US), etc
Used literature & external links
https://www.consumerfinance.gov
https://www.consumerfinance.gov/rules-policy/
https://en.wikipedia.org/wiki/Category:Debt_collection
https://en.wikipedia.org/wiki/Fair_debt_collection
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