Debt recovery solutions
Table of contents
Debt recovery solutions are the means and methods of a debt recovery process for the successful collection of delinquent amounts, past-due invoices and bad debts. Bad debts are considered to be amounts written-off as uncollectible ones by the original creditor. Such solutions represent the procedure of an approach to debt collection using different recovery tools. Debt collection solutions are part of the whole debt collection process and of the recovery services a debt recovery agency can offer. If successful, these solutions can profit the original lender and increase his company’s cash flow. As such amounts have been marked as hard to recover and treated as a loss, their collection is a potential benefit for the original creditor.
Debt recovery solutions & methods of collection
Debt recovery solutions used by a DCA (Debt Collection agency) can involve different tracing and communication techniques along with pre-legal and legal actions, which result in successful debt collection. The service for providing these solutions and methods usually requires payment either by the creditor or by the debtor, depending on the DCA’s company policy.
The first default recovery solutions a collection agency will use are the tracking and tracing methods. They are used to find and contact the subject of debt, also known as “consumer”. After the debtor has been located, the agency will contact the consumer, using various communication tools: official reminder letters, phone calls (within the accepted frame 9am-8pm, Mon- Fri), voice messages, etc. These are widely known under the name of multichannel communications debt recovery solutions. If there is a situation, where the debtor cannot be found, contacting employers and family members is an accepted and legal option as well, but only, if the matter of the call remains classified.
Official letters are usually involved from the beginning of the collection process. First, the general reminders are to be sent. If there is no response from the debtor and no result in collecting the debt, letters of demand will be used as further debt recovery solutions. Depending on the situations, such letters can be harsh reminder, final reminder (letter before action), small claim court informative letter, etc. The letters have polite and formal tone.
Other debt collection solutions can be the usage of in-home visits from enforcement agents, collection solicitors or bailiffs. The recovery lawyers and bailiffs have the legal right to seize part of debtor’s belongings and possessions, sell them at auction and settle the debt amount in full. However, such agents avoid using force actions and prefer to arrange another payment on the subject of debt. This is the so-called debt negotiation, which is also part of the debt collection solutions. Here the debt recovery agency offers a convenient payment plan for the debtor. He can either make one large single payment to settle the debt at once or he can choose the option of several small payments set on a monthly basis.
If the above pre-legal actions result in a negative outcome, court proceedings may follow as a next collection debt solution. Before transferring the case to court, the collection agency has to send one final note to the debtor, informing him that legal actions will take place, specifying the exact date of the process. Such legal actions are the last part of debt collection methods. From then on the case will be undertaken by court and the debtor will no longer be contacted by collection agents, but only by official court representatives.
A debt collection agency aims not only to collect the debt in full but also to use debt recovery solutions and methods, which are not in contradiction to laws and ethics, in order to preserve the business relationship between creditor and debtor.
Legal requirements for debt recovery solutions
In order to be legal in the United Kingdom, debt recovery methods and debt collection agencies have to licensed and registered according to the Consumer Credit Act and Data Protection Act (http://www.legislation.gov.uk/ukpga/1998/29/contents). Also to be considered as valid and active, a collection agency has to comply with the Fair Trading Act 1973 and the CMA (Competition and Markets Authority).
For the US a DCA has to act under the FDCPA- Fair Debt Collection Practices Act. In the United States, however, there are different requirements and regulations for consumer and for commercial debt collection solutions and debt collection agencies.
For the EU in general, there are several regulations and acts, such as the EU Directive on Late Payments (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:048:0001:0010:en:PDF), and the orders voted at the Brussels Convention: the EEO- European Enforcement Order Regulation, the ESCP- European Small Claims Procedure Regulation, etc. The European Collectors Association’s website also provides information about different countries’ acts and laws- http://www.europeancollectors.org/.
Used literature & external links