Worldwide debt collection process is more complex than the debt recovery performed within a single area. There are different nationwide regulations for international debt recovery, integrated by the EU. In order an transnational debt collection agency to be recognized as licensed, it has to comply with specific laws on national and transnational level, and to act legally under the terms of the European Commission.
According to the EU, international debt recovery acts and regulations are the: European Enforcement Order (EEO), ext. link 2; European Order for Payment (EOP), ext. link 3; European Small Claims Procedure (ESCP), ext. link 4; Unfair Commercial Practices (UCP), ext. link 5, for international commercial debt recovery, etc.
Apart from the EU acts and regulations, there are laws for specific countries as well. When the debtor is based in UK, the international debt collection has to comply with the Office of Fair Trading (OFT)- ext. link 6. If the debtor’s residence is Canada, the Office of Consumer Affairs (OCA) is valid, ext. link 7. The European Commission also provides information about national debt institutions and their specific country laws (ext. link 8).
Nationwide debt collection can be performed by various types of recovery agents, which are legally authorised to collect bad debts on a nationwide, and even on a worldwide level. As transnational collection agencies come in different forms, so do the recovery agents. Depending on their kind, such international debt collectors have different advantages and benefits for the lender. According to the situation, the original creditor can decide which one to choose.
No matter the type of nationwide recovery agents, the process can be separated into international consumer debt collection and international commercial debt collection. The first one serves the recovery of individual debts, and the second is also known as “business-to-business” and represents collection of debts from businesses and organisations.
Such agents operate within creditor’s company and are part of its subdivisions and internal departments. In some countries they are not considered as valid collection agencies (FDCPA- Fair Debt Collection Practices Act, ext. link 9; according to GSA laws- Germany, Switzerland, Austria), as they recover debts on behalf of their own organisation. Therefore they do not have the right to charge the debtor an interest. However, they are legally authorised to collect their own debts without requesting payment of an additional percentage fee. In the German-speaking area, a creditor has no legal authorities to collect his own debts.
First-party nationwide debt collection is pertinent in cases, where creditor’s company has a specialised debt collection department and when the same company can afford to spend enough time and resources for the successful recovery of their bad debts. Using such international debt collection can result in earlier debt collection commencement, and the creditor possesses full control over the collection procedure.
These are the most common international debt recovery agents. They act on behalf of the original creditor, but are not part of the original lender’s company. They are separate from the business relations between creditor and debtor and do not share the contract between the first two sides of the agreement. Such agencies collect past-due debts for a commission fee, widely known an interest rate. This is the percentage of the entire debt amount, which can be requested either from the subject of debt, or from the lender, depending on nationwide debt collection agency’s policy.
Using a third-party international debt collection has its benefits for the creditor. When hiring such collectors, the original lender can concentrate on other aspects of his business, rather than spending time and resources for collecting delinquent amounts. These agencies can recover debts, which have been marked by the creditor as “written-off” or hard to collect.
International debt purchase refers to the process of buying default profiles from the original creditor for a portion of the debt amount. Debt buyers then become the new debt owners and have the legal right to collect the delinquent amounts on their own.
Such international debt collection can be beneficial for the creditor, as he receives a certain amount for his charged-off debts. This is considered as a positive financial income, as the original lender’s written-off debts represent a loss, and the vendition of such debts represents an unexpected profit for creditor’s company.