National debt collection agency

Helene Mueller
eCollect support team

A national debt collection agency pursues bad debts and late payments on the territory of one country, usually where they are registered in. A local DCA (Debt Collection Agency) consists of different recovery agents, including standard debt collection agents, enforcement agents, debt collection bailiffs and legal attorneys. They are all involved in the debt collection process and recover bad debts from indebted consumers on behalf of an original creditor. A national debt recovery agency can also offer debt purchase to the lender. There are some DCAs, which not only recover past-due debts, but can also buy them. After the debt purchase the agency will become the new creditor and has the right to process collection operations on behalf of his own company. According to some acts (e.g. the Office of Fair Trading in UK) a creditor can collect debt amounts from the debtor charging him late payment fees, but not DCA’s interest fees. Therefore, when an international debt collection agency based in UK purchases a debt profile, it will has the right to request past-due payment charges, but not a commission fee as a debt recovery agency.

National debt collection agency- basic aspects and components

Every nationwide debt collection agency has standard aspects and components regarding its structure, functions, types and services. Furthermore all local recovery organisations act in compliance with corresponding local or state laws.

Depending on whether the recovery organisation is hired by the original creditor or acts in his company, the transnational debt collection agency can be divided into third-party (privately operating) and first-party (deriving from creditor’s internal departments). Both types use very similar or completely identical recovery methods of collection. There are, however, two differences between first- and third-party national debt collection agency. When the DCA is situated in lender’s company, the collection process starts earlier but the agents do not possess such professionalism, as private DCAs. When the agency is hired by the creditor and represent separate organisation, it is involved later in the recovery process, but has higher success rate and higher possibility to collect the debt amounts in full.

Third-party agencies work together with legal attorneys and different types of enforcement agents, which eases the whole process. Debt recovery lawyers can also transfer the debt case to court, but this is used as final method of collection, as court actions might lead to time-consuming, costly and extensive process for the creditor and for the national debt collections agency.

A national default recovery agency will use different types of demands towards the subject of debt. These demands are legal, carried out in conformity with DCA and consumer rights laws; can be forwarded in written or oral form, or in the form of personal in-house visits. In-house visits are performed by collection agents. They can negotiate with the debtor and offer him a payment plan based on equal monthly transactions. Debt solicitors also send various official documents as letters of demand, final letters before action, etc.

Every national default collection agency operates in accordance with its country and state laws. In Australia debt collectors have to operate according to the Debt Collectors Licensing Act 1964 (
); in UK the Office of Fair Trading (also for Wales) and the Financial Conduct Authority (ext. link 4) are valid, and the Consumer Financial Protection Bureau offers consumer protection assistance for UK consumers and debtors at
. In the U.S. the main regulator for a national debt recovery agency and for protection debtor’s rights is the FDCPA- Fair Debt Collection Practices Act. Apart from it, U.S. debt collectors have to comply with the Debt Collection Improvement Act of 1996 (ext. link 5), the Federal Debt Collection Procedures Act of 1990 (ext. link 6), etc. In Germany, creditors and DCAs have to act according to the ZPO- Rules of Civil Procedure.

National debt collection of individual and commercial recovery

A national debt collection agency offers recovery of both consumer and commercial debts. Consumer debts are owed by individuals and derive from personal consumption. Commercial debts appear after a business loan, and are also known as business to business (B2B) debts. Before lending a monetary amount, a creditor will usually check consumer’s credit history (if an individual) or credit worthiness (if a business organisation). If the lender has hired a national debt collection company, this agency can also offer screening services in order to score what are the chances for possible falling into debt.

Consumer and commercial debts have different statute limits and the national debt collection agencies have to comply with these periods. In some countries commercial debts have longer time-limits than individual; and secured debts (no matter if B2B or consumer) are more long-termed than unsecured past-due payments.

Used literature & external links