Credit collection services are provided by collection agencies which apply a wide range of credit recovery methods. Such Credit recovery are used for successful collection of outstanding receivables and bad debts. The DCAs (Debt Collection Agencies) serve different industries in order to provide professional help for businesses. Such agencies supply these businesses with a range of high-quality services, which are needed to ensure prompt payment. DCAs offer their services when a customer (debtor) ignores the specified time frame and prolongs the bill or the invoice, or when the subject of debt simply forgets that he has a default payment. Usually companies, which offer goods and services for B2B (business to business) are affected the most.
Credit collection services & debt recovery
Pre-legal and legal collection methods consist of ethical working practices, and are designed to protect creditor’s reputation and good name, increase profit, maximise customer’s organisation cash flow and in the same time decrease costs and help maintaining the finance balance in creditor’s company. Typical services a debt recovery agency can offer to its clients a pre-legal credit collection services, including:
- Call centre support;
- Consultancy and advice;
- Data research and scanning using specialised software;
- Profound investigation of the debtor’s profile;
- Legal and ethical tools in order to contact the subject of debt. These methods can vary from personal emails and letters, phone calls, text messages and voice messages to contacting the debtor via Skype, LinkedIn, etc.;
- Provide professional outsourced credit control team to advise within the creditor’s company during the credit collection process;
- Legal dunning process services. The beginning of this process depends on the country. In Germany, for example, a legal dunning notice can be issued only when the total amount of the debt has been dunned not less than three times;
- Detailed debtor’s trace, both electronic and manual (it is always verified and legal) in order to track the debtor or collect a new address or contact details;
- In-house debt collection personal visits, also known as “field collection services” (where appropriate, e.g. when the subject of debt agrees to personal visits)- if necessary, a debt collection agent can visit the debtor’s property in order to settle an agreement and collect the amount due. Field agents implement contact with the subjects in debt and negotiate payment either on the whole default amount or paid on a monthly basis until the debtor’s profile is clear from debt;
- Letters before litigation actions consisting of detailed information about the outstanding amount due to be paid;
- Last detailed checks before litigation to ensure legal actions are viable and to determine whether litigation will be a suitable course of action;
- Legal credit collection services (debt collection operations management):
In some circumstances pre-sue actions are not successful, despite best efforts. In such cases legal workflows procedures take place. All defaulted debtors’ accounts endure litigation segmentation and thorough screening. Legal actions consist of precise and prompt use of court actions along with effective legal methods of enforcement. Some of the court credit collection services are:
- Official claims to affiliated attorneys;
- Enforcement processing (sending enforcement agent or court bailiff). In order to settle the debt outside court, an enforcement agent can negotiate with the debtor and sell part of his belongings to recover the debt amount due to be paid. It is possible that the enforcement procedure includes distraint or “the seizure of someone’s property in order to obtain payment or money owed”;
- Legal attachment, where part of the debtor’s property, which is equal to the amount of the default payment, is transferred to the creditor in order to settle the debt;
- Statutory demand letter (must be given personally to the debtor) before starting legal actions;Legal claims & court garnishment- the debtor receives an official document and he is obliged to pay the debt’s amount, e.g. wage garnishment;
- Long-term monitoring:
Credit control services (including credit check as well) for avoiding future debts and increasing creditor’s company profitability. Such strategy will drastically decrease bad debts in a business as it establishes the potential risks by researching the borrower’s profile before lending a credit amount; Monitoring past debtors. This technique can reduce some costs in an organisation by following the debtor’s profile in order to avoid new bad debts; Status reports on future clients and partner companies. This report is vital when a company is about to make an important business decision.
Used literature & external links
https://en.wikipedia.org/wiki/Garnishment
https://www.govinfo.gov/content/pkg/FR-2003-12-23/pdf/03-31489.pdf
https://en.wikipedia.org/wiki/Fair_Debt_Collection_Practices_Act
https://en.wikipedia.org/wiki/Attachment_(law)
https://en.wikipedia.org/wiki/Debt_collection
https://en.wikipedia.org/wiki/Fair_debt_collection
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