Debt collector

Helene Mueller
eCollect support team

A debt collector is the entity collecting outstanding receivables. Such organisations hold the necessary skills of convincing the debtors to pay their bad debts and overdue invoices. Their services can be partly or completely free; in some cases they require a commission fee to be paid by their clients- the first party. Using a debt collector can help creditor’s company to maintain its focus on core business activities, which may lead to organisational growth and successful time-oriented results. This can be rendered as a major advantage in a business organisation. As the debt collection process is time-consuming, more and more companies prefer to hire a professional debt collector, which is a chance for a better and faster financial loss recovery.

Functions and features of debt collectors

  • Debt collection agencies locate and contact the debtors and send constant reminders regarding the debtors’ overdue payments and delinquent accounts. This is done by using special tracing tools and recovery methods such as standard letters, email, phone, text messaging, Skype, personal visits, etc. If no response from the debtor is received, they prepare official letters to the subject and also statements to the credit department.

  • One of their goals is to negotiate for the full payment and avoid legal actions as this could be stressful for both sides. If they can’t get the total debt amount, they will negotiate for a lower amount, if necessary. If the debtor can’t pay the full amount, the debt collector might offer a payment plan, e.g. smaller parts of the whole amount to be paid per month. After collecting the debt, debt recovery agents will continue monitoring the old debtor for a period of time in case any new debts appear.

  • Debt collection agencies always use a polite manner when contacting the debtor in order to preserve the good name of the creditor’s company and the business relationship between the first and second party.

  • Clients are debt collectors’ prime asset and they will do their best not to lose client’s trust. This means the recovery agents won’t do anything which might harm their clients’ reputation.

  • Debt collection agents are in charge of preparing documentation for legal actions, if the pre-legal were not successful. If necessary, recovery agents might co-operate with debt enforcement agents or lawyers to execute property/personal goods’ seizure, or to perform litigation and court actions.

  • A debt collector might add extra charges and interest to the original debt amount, which is to be paid either by the creditor or by the debtor, depending on the DCA’s company policy and T&C. The debt collection agency’s commission fee cannot be added unfairly as the percentage is strictly regulated by law. Their payment can consist of a percentage from the default amount or can be a membership fee paid per year or a fixed fee per month.

  • Debt collectors can add additional fees, if they offer Court and Insolvency services and if their pre-legal and legal actions require payment on behalf of the creditor/debtor. Costs incurred by legal actions are strictly determined by GKG (Eng.: Law for court fees) and Law for Layer fees (RVG) in Germany, by the Ministry of Justice in Denmark, Fair Debt Collection Practice Act (FDCPA) enforced by the FTC (Federal Trade Commission)- both for USA, etc. and are not negotiable.

  • Collectors aim to use transparent process and pricing list (if any) in order to keep both their clients and their debtors informed

  • As debt collectors are professionals, they will highly increase one’s company’s chance of recovering bad debts and defaulted profiles, and this will lead to minimising the losses and financial growth

Used literature & external links