- How Do Debt Collection Agencies Work? | Everything You Need To Know
- Hired Collection Agencies
- Agencies Buying Debt
- How Debt Collection is Supposed to Work
- How Dishonest Collectors Work
- Consumer Protections
- How to Deal With Collectors
- Largest Collection Agencies
- Final Thoughts
- Debt Collection in Germany – No Cure No Pay | Bierens (Tip!)
- Payment behaviour of German companies
- Advantages of debt collection in Germany
- Announcing legal proceedings
- Debt collection laws in Germany
- The Mahnverfahren
- Ordinary civil proceedings (Klageverfahren)
- Exceptions to the limitation period
- Preventing your invoice from expiring in Germany
- Debt collection and repossession
- Debt collection
- What debt collectors can and can't do
- Best Collection Agency Reviews of 2021 — business.com
- Pros of Rocket Receivables
- Cons of Rocket Receivables
- Customer Service
- Collection Agency (Definition, Characteristics) | How Does it Work?
- How Does Collection Agency Work?
- How are Debtors Getting Paid by Collection Agencies?
- #1 – Debt Ownership
- #2 – Ageing of the Debtor
- #3 – Level of Difficulty in Debt Collection
- Recommended Articles
- FREE Debt Collection Agency | Your Debtor Pays our Costs!
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How Do Debt Collection Agencies Work? | Everything You Need To Know
You may not know it when a debt collector calls, but some have bigger incentives than others for pushing you to pay.
There are two types of collection agencies: Ones that are hired by creditors to collect debts, and those that buy old debts from original creditors for sometimes pennies on the dollar.
Understanding the motivations and incentives of both types of debt collectors can smooth your interactions with them.
Hired Collection Agencies
Debt collection agencies are sometimes hired by creditors to collect debts that are at least 60 days past due.
The more money they collect, the bigger cut they get, often 25-45 percent of the amount collected. The rest goes to the creditor.
These agencies act as middlemen to collect all types of delinquent debts, including credit card, medical, car loans, personal loans, student loans, and unpaid bills such as utility and phone bills.
The agency only gets paid when it collects your debt, and the more it recovers, the more money it receives as payment for its services.
Agencies Buying Debt
A second type of debt collector is a debt buyer. It buys debts from an original creditor that has determined that it’s unly to collect.
Numerous accounts are sold together as a group, often with similar features such as accounts that aren’t too old and haven’t been worked on yet by another debt collector.
Those debts could fetch higher prices from a debt buyer than old accounts that other collectors have failed to collect on.
Debt buyers bid on the packages, sometimes paying 4 cents of every $1 of debt.
An account with $1,000 owed would cost $40 to purchase, for example, and every penny collected after $40 would be a profit for the debt buyer.
Debts can also be sold by type. An old mortgage debt is worth more than a utility debt.
A debt buyer doesn’t send any of the amount collected to a creditor. It keeps all of the money it collects because it has already paid the original creditor for the debt.
This can make a debt buyer more unsavory, to put it nicely, in the methods they use to collect debts.
How Debt Collection is Supposed to Work
Reputable debt collectors are supposed to follow the laws, including consumer protection laws.
When contacting a debtor, they’re also supposed to be fair, respectful and honest.
For example, debtors have the right to make a written request for verification of debt they’ve been contacted about.
The debt collector is supposed to suspend collection activities and send a written notice of the amount owed, the company owed to and how to pay it.
If the debt can’t be verified by the collector, it will stop trying to collect it.
It will also notify the credit bureaus that the item is disputed and request that it be removed from the person’s credit report.
If the collector doesn’t own your debt, it will tell the creditor that it has stopped trying to collect because it can’t verify the debt.
An honest and reputable debt collector will try to get accurate and complete records so they don’t go after people who don’t really owe money.
If you tell them you were the victim of identity theft, they should try to verify your claim.
How Dishonest Collectors Work
Unscrupulous debt collectors, however, may violate the Fair Debt Collections Practices Act, or FDCPA, or come close to breaking it.
Debt collection is the financial product or service most complained about to the Consumer Financial Protection Bureau, the CFPB reports. Specific complaints include:
- Being contacted about debts no longer owed.
- Accounts forwarded to third-party collectors without any notice from original debt holder about an outstanding balance.
- Bothered by frequent daily calls by debt collectors at home and at work.
Debt collectors are often pushy because they’re taught in training that all debtors are compulsive liars, according to a story based in part on a book by a former debt collection agency owner.
They may ask you to pull money from areas that would make your financial planner cringe: Retirement accounts, another credit card, or borrowing from friends and family.
The Federal Trade Commission, or FTC, enforces the FDCPA, the main law prohibiting debt collectors from using abusive, unfair or deceptive practices to collect money.
Here are some of the protections under that law:
- Calling at all hours: A debt collector can’t contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m. They can’t contact you at work if you tell them you’re not allowed to take calls there.
- No pretending: They can’t pretend to be someone else when contacting you, such as an attorney or government agency. They also can’t falsely represent that they work for a credit reporting company.
- No harassment: Harassment, threats and deception are illegal. This includes using profanity, threats of violence, calling repeatedly, saying you’ll be arrested if you don’t pay your debt or that they’ll garnish your wages unless permitted by law to do so.
- Limits on contacting others about your debt: Debt collectors may contact people you know, but they can’t discuss your debt with anyone other than you, your spouse or your attorney. They can contact other people to find out your address, home phone number and where you work. They’re usually prohibited from contacting third parties more than once.
- Written notice: Every collector must send you a written “validation notice” telling you how much you owe within five days of first contacting you. It must include the name of the creditor and how to proceed if you think you don’t own the money.
- Unfair practices: Collectors can’t engage in unfair practices when trying to collect a debt. These include trying to collect any interest, fee or other charge on top of the amount owed unless state law allows the charge; deposit a post-dated check early; take or threaten to take your property unless it can be done legally; contact you by postcard.
How to Deal With Collectors
To deal with a debt collector, it can help to know your rights.
Tell them not to call you at work, ask for written notice, and report them to your state Attorney General’s office, the FTC and the CFPB if you think they’ve violated the law.
You also have the right to tell the collector not to contact you again, even if the debt is legitimate.
Sending a letter to the collector telling them not to contact you again won’t erase the debt, but it should stop the contact.
The creditor or collector can still sue to you collect the debt.
When you write such a letter, send it by certified mail and pay for a “return receipt” so you can document when the collector received it.
Make a copy of the letter for yourself.
Once received, the collector can only contact you in two instances — letting you know they’re filing a lawsuit or other specific action, or to tell you there will be no further contact.
It’s also worthwhile to know the statute of limitations in your state on when lawsuits can be filed over unpaid debts.
The FDCPA limits the right to sue for payment by state, ranging from three to 10 years in most states.
After the time has elapsed in your state, you’re no longer obligated to pay the debt — no matter how many times a debt collector calls.
But there’s one big caveat. If a consumer makes a payment on a debt, even a small amount, then the time limit on debt collection lawsuits may be extended. A payment resets the clock.
Largest Collection Agencies
If you have been contacted by one of the following collection agencies, click on the link to learn how to deal with them.
What’s been your experience with collection agencies? Let us know down in the comments.
Debt Collection in Germany – No Cure No Pay | Bierens (Tip!)
When doing business with a German trading partner, you are confronted with different trading traditions and customs than those you are used to. Moreover, legislation differs in Germany than in your country. In addition, language and culture are a barrier as well.
All the above often makes debt collection in Germany to be complicated and time-consuming for you. That is why you should call in our German specialists. They have the means to get your debtor to pay.
Payment behaviour of German companies
- The legal payment term for invoices is 30 days
- German companies are among the best payers in Europe
- Around 16% of German companies do not pay on time
- A payment term of 14 days is customary when sending a reminder
The Germans are among the best payers in Europe. Nevertheless, more than 16% of German debtors do not pay on time. Therefore, it is important to have a good credit management system for German customers, especially if you are not located in Germany yourself.
After the first demand letter, it is usually already evident whether legal proceedings will be required or not. In Germany, amicable procedures are difficult to reach when settling conflicts, and your German business partner will not hesitate to hire a lawyer. For a successful settlement of your debt collection case, it is advisable to seek the aid of a German debt collection lawyer.
Advantages of debt collection in Germany
- German collection lawyers in your country
- German-speaking lawyers
- Highest success rates
- Collection throughout Germany
- Always a single point of contact
- 24/7 online access to our portal
- No Cure No Pay debt collection
The best way to collect your invoice in Germany is by seeking the help of one of our German Rechtsanwalt (lawyer), or collection specialists. You will not have to travel to Germany, as you can simply contact our specialists at Bierens. They have extensive knowledge and experience with the laws and regulations. It goes without saying that they collect in German, their native language. This way we can make your German debtor pay quickly.
The collection process in Germany can be divided into two phases. In the extrajudicial phase we collect without the intervention of the court, in the judicial phase we do involve the court to get your German customer to pay. Because we are a law firm, we can assist you in both phases.
Our starting point is to always start the collection procedure in the extrajudicial phase. In this phase we try to avoid the intervention of the court. We contact your German debtor to ensure that your debtor still pays. In the extrajudicial phase we have the following possibilities in Germany:
We send the debtor a written demand letter and contact them by telephone, requesting that they pay your claim within a few days, together with interest and costs.
Announcing legal proceedings
In case of non-payment, we can start legal proceedings in consultation with you. Often the announcement of a legal procedure will already persuade your German customer to pay anyway.
If your debtor refuses to pay during the extrajudicial phase, we can go to court in consultation with you. For this purpose we do a credit check and analyse the financial situation of your debtor.
This enables us to better assess how your debtor is doing financially and determine whether legal proceedings are worthwhile. In most cases, when the claim is disputed, we must start legal proceedings.
We will always let you know in advance what the possible costs are, and we will only start working after receiving your permission.
Would you to start legal collection proceedings against your German debtor? If so, the first question is in which country should you litigate? In your own country or in Germany? The answer will depend on the competent court.
In your general terms and conditions you can make agreements about the competent court in the event of a (payment) conflict. This is also called choice of forum. Have no agreements been made? Then the main rule is that the court in the country of the defendant has jurisdiction. In this case, the German court. You must then go to Germany to follow legal proceedings there.
In addition, the main rule is that the law of the country of the seller or service provider applies. In this case the law of your country is applicable.
We then get this difficult situation where the German court must judge the case according to the law of your country. A legal system he is not familiar with.
This is not a desirable situation, which is why our advice is to make agreements about this in your general terms and conditions. You can also agree that you can litigate in your own country, should a conflict arise.
Debt collection laws in Germany
When taking legal action against a German customer, there are several German collection laws that we can rely on. The best collection procedure to use will differ depending on the situation. Of course, our lawyers will always look for the best option for you and your collection case.
The German legal system protects debtors. Therefore, it is harder to make a German debtor pay. However, our lawyers know which collection methods can and need to be used in order to collect a debt in Germany.
The “Mahnverfahren” is an accelerated procedure for undisputed claims. It is characterized by its speed, simplicity and low cost.
Within a relatively short period of time, you can obtain an enforcement order (“Vollstreckungsbescheid”); which orders the debtor to pay both your claim and the costs of the proceedings. Your debtor only has a few weeks to raise legal objection.
If that does not happen, then the order for payment becomes legally binding and we can commence enforcement proceedings, such as seizure of the debtor’s bank account or sending a bailiff to recover the debt.
Ordinary civil proceedings (Klageverfahren)
Is your claim disputed? In that case, it is advisable to start with an ordinary civil procedure. Both parties must substantiate their statement with supporting documents. After one or more court hearings, the court will make a judgement. With this judgment, we will be able to for example have the debtor's bank account seized. Settlement is still possible prior to this judgement.
In addition to German collection laws, there are also a few European measures that can be used if your German customer refuses to pay. For the European Union it is important to stimulate trade between European countries.
Therefore, complicated procedures are unwanted.
That is why, in addition to the normal procedures, there are two alternative procedures that can be used for foreign claims between two EU countries: the European Payment Order Procedure and the Small Claims Procedure.
Both procedures are relatively quick and inexpensive. A standard form must be completed and sent to the competent court.
If you and your trading partner have not previously agreed on the competent court in the event of a conflict, then it is usual for the judge in the defendant's country to have jurisdiction.
Which is, in this case, the German court. The court then deals with the collection case and makes a judgment.
The Small Claims Procedure is only suitable for small claims up to € 5,000. The European Payment Order only applies to undisputed claims. Although it is a simple procedure, it is not often used for German debtors. The German Mahnverfahren procedure is fairly similar to this procedure, but a lot more effective and faster.
- Upload your debt recovery case online
- We will process your case immediately
- We will immediately send a payment reminder to your debtor
- Together we will determine our approach
- View your case 24/7 through our online portal
- Questions? Your contact is always available to assist you
- Your unpaid invoice will be paid
Have you agreed in the general terms and conditions that the court in your country is competent? Then legal proceedings can be started in your country.
Depending on your specific situation, our lawyers will look at what is most beneficial for your company. If we are going to litigate in your country against your German debtor, we can start ordinary civil proceedings.
Both parties will be heard, after which the court will make a judgement.
When a judgment has been obtained, it must still be executed in Germany. Within the EU, it has been established that all judgments passed in a member state are also recognised in other EU countries.
A specific form must be requested for the enforcement of a foreign EU judgment in Germany. This form has to be sent to the bailiff in Germany, together with the foreign EU court's judgment.
The bailiff then ensures that the judgment is executed in Germany.
Once the limitation period has exceeded, an outstanding invoice expires. It is no longer possible to enforce its payment through the court. It is therefore important to keep a close eye on this prescription period.
For business claims in Germany, the general limitation period is 3 years. This period starts at the end of the year in which the claim arose.
Imagine: you have delivered an order to a customer. On April 1, 2017 you send the corresponding invoice, with a payment term of 30 days. Your customer did not pay. The due date of the invoice was May 1, 2017. The limitation period began on December 31, 2017 and lasts for 3 years. Your invoice will therefore expire on December 31, 2020.
Exceptions to the limitation period
The limitation period of 3 years applies to normal claims. Bear in mind that the limitation period for some claims is different. For instance, claims related to transport law throughout Europe have a limitation period of 1 year. For their part, freight forwarders only have 9 months to file a claim, from the date the shipment is delivered.
In German law, however, other limitation periods sometimes apply as well. For example:
- In the case of a building contract (“Werkvertrag”): if there is a work delay in connection with the production, maintenance or modification (e.g. a repair) of an object, a limitation period of 2 years applies.
- In the case of a construction contract: if there is a work delay in connection with the construction of a building, a limitation period of 5 years applies.
Therefore, when concluding a contract with a German business partner, always ask a specialist for advice on what the limitation periods are.
Preventing your invoice from expiring in Germany
It is possible to prevent your invoice from expiring by interrupting the limitation period. The interruption stops the limitation period. In Germany, the limitation period can only be interrupted in one way, namely by starting legal proceedings.
For years, Bierens has helped many companies around the world with their debt collection cases in Germany. Thanks to our expertise, we have not only assisted foreign businesses, but also German firms in their own country. We specialise in debt collection cases in various areas of law:
- Buying and selling
- Construction law
- Rental and leasing
- Agency agreement and distribution agreement
- Damages and unlawful acts
“Bierens is a highly effective and professional partner. Not only do they have a good debt collection procedure, they also give solid advice.”
Manuel Maas, Eneco
Is your debtor located in Berlin, Cologne or Frankfurt? The location of your debtor does not matter. Our specialists can assist you throughout Germany.
It is no longer necessary for you to seek the help of a debt collection agency or a lawyer based in Germany in order to successfully collect your case.
You can simply transfer your case online, and our German specialists will immediately get to work.
If you are looking for a collection agency, you are actually better off with a debt collection lawyer. Our German debt collection lawyers have more resources than a debt collection agency. Moreover, they work faster and are also more successful. This is beneficial for you and your organisation, as you will quickly have your money in your bank account.
During the extrajudicial phase, we work the No Win, No Fee principle. If we do not collect, then you pay no legal fee. You only pay €150 for administrative costs. After all, an unpaid invoice causes enough frustration. We think it would be unfair if you were to be faced with all sorts of additional fees.
You only pay a fee if we can collect the claim. We try to recover this fee from the debtor as much as possible. Therefore, a successful collection case will cost you almost nothing! That is what we call justice, as you will be receiving what you are entitled to.
When the case is resolved, we do our best in order to recover the collection costs from your debtor. In that case, you German debtor will pay the outstanding invoice, as well as the collection costs. This way, you will pay little to no collection fees to our organisation.
Do you have a German customer who has left your invoice unpaid? Or do you have a different conflict with your customer? Our collection specialists and lawyers are happy to help you resolve your payment conflict. Feel free to contact us for more information. Do you no longer want to wait for your money? Then send us your invoice right away. Our specialists will immediately start working on your case.
Debt collection and repossession
Video transcript: What a repo agent can and can't take[Knock knock] Aunty: Who’s this calling at hour of the Shortland Street?
Repossession agent: Good evening, are you Herman Faleafa?
Herman: Maybe…… What’s this about?
Repossession agent: Oh, silly me. Where are my manners. I’m Chip Blockinson from Your Stuff, Our Stuff. You would of received a repossession warning notice in the mail a few weeks ago in relation to several payments on your car loan with Awesome As Cars LMDV.
Herman: Uh… I’m not sure?
Repossession agent: Yes, a letter was sent. Here’s a copy of it here if you wanted to take another look. It has a list of secured items I can take to pay off your loan.
Herman: No, it’s okay I read it. But the car’s still in pieces over at my cousins workshop. I had a bit of a run in with an ice cream truck.
Oh! Hello, I’m Chip Blockinson.
Aunty: Hmmm, Let me see that list.
Repossession agent: As I was explaining to Mr Faleafa, the repossession warning notice tells you how much you are in default, on your car loan with Awesome as cars. Which is… uh yes here it is, eight thousand dollars and 50 cents.
Aunty: Eight thousand dollars!?
Repossession agent: And, fifty cents.
Aunty: How does this happen, Herman?
Herman: The car’s busted and I got a bit behind in the payments, Sorry Aunty.
Repossession agent: So now you understand I have the rights to take your personal effects.
Aunty: Only the items listed here.
Repossession agent: Yes, of course.
Aunty: The ridiculously large television isn’t on your list, young man.
Repossession agent: Oh, silly me. You’re quite right.
Aunty: No no no no no no no no no, not the heater. Under the new law, you can’t take essential items. Last time I checked, heating was pretty essential.
Repossession agent: Actually I was just shifting the heater so I can get to the couch.
Herman: I’ll get you a cushion, Aunty.
Narrator: Repossession is a difficult situation. Even if you end up having your goods repossessed, repossession agents have to give warnings and follow the rules, including limits on what they can and cannot take. It is a good idea to take care when listing the items you list as security.
If you don't keep up repayments for loans, fines and other debt, it can be passed onto a debt collector. Debt from loans and credit contracts is covered by the Credit Contracts and Consumer Finance Act (CCCFA).
If your debt is from fines instead of credit, it is not covered by the CCCFA. If you think you have been mislead by the debt collector you can report them to the Commerce Commission. If the debt collector behaves in a threatening way, report it to the police.
Debt collection agencies either:
- buy your debt, making them the new creditor
- collect your debt for the original lender.
Your rights are different with these two options. If the debt collector buys the debt, they are now the creditor so must follow the CCCFA and responsible lending code. This includes charging reasonable fees.
Debt collection(external link) — Commerce Commission
No matter which kind of debt you have or the debt collection process, you still have options to repay it:
- Contact the debt collection agency. Try to renegotiate smaller instalments with them, or with the original source of the debt. They do not have to agree, but it is in their interest to help you pay your debt.
- Contact a financial mentor. Talk through your options and make sure the debt is accurate. They can also talk to debt collectors on your behalf and make a complaint to your lender's dispute resolution scheme.
Free confidential advice(external link) — MoneyTalks
Prevent debt collection and repossession by talking to your lender about your options as soon as you have problems with any repayments.
What debt collectors can and can't do
Debt collectors should only contact you when they need to, and for a reasonable reason.
A reasonable reason includes:
- asking for payment
- creating or reviewing a repayment plan
- finding out why you haven't followed an agreed repayment plan.
Debt collectors should only visit you if they can't contact you by phone, post or email, unless you already agreed to in-person visits.
Whether a debt collector has bought your debt or been hired by the lender, or your debt is from fines, there are laws they must follow:
- Do not use physical force, pressure, or unreasonable harassment or hassling when dealing with you or your family.
- Do not enter homes or garages by force.
- Do not try to mislead or deceive you about the debt, or threaten court action without a genuine legal reason.
- Do not take advantage of any vulnerability, disability or other similar circumstances.
- Only tell family, friends, employer or others about your debt if you give permission, eg it was in your contract.
- Give accurate information to credit reporting agencies — providing false information about debt is illegal.
Report any assault or threats of violence to the police.
If you dispute your debt because you don't think it's accurate — or you apply for hardship — debt collection and repossession must stop until these issues are resolved. If debt collection or repossession continues during a debt dispute or hardship application, contact your lender/debt collector or your lender's dispute resolution scheme.
Best Collection Agency Reviews of 2021 — business.com
Rocket Receivables Stage Two Contingency Collections steps it up a bit, but small businesses pay for the extra services. Un other collection agencies that take a percentage of the debt recovered, Rocket Receivables splits it 50/50.
You won't pay if the collection agency doesn't recover any debt for you, but it's not the cheapest. In stage two, Rocket Receivables turns the collections over to its skilled collectors, who send demand letters and start legal action if necessary.
Any accounts that aren't resolved in stage one are automatically transferred to stage two without any added fees. Stage two is for hard-to-collect debt that is more than 120 days old.
In addition to low prices with its fixed-rate plans, Rocket Receivables has a good track record recovering debt. While it doesn't list its recovery percentage on its web site, it states that its success rate is four times the industry average. Over the last 10 years, it has recovered more than $6 billion in debt for more than 60,000 clients.
When it comes to recovering money, Rocket Receivables has several strategies it can employ. Some of those services include demand letters, skip tracing and litigation services. Rocket Receivables is licensed to operate in all 50 states and services many industries, including banks, municipalities, credit unions, insurance agencies, retailers, manufacturers, and education providers.
This collection agency also stands out when interacting with your debtors. You want a company that treats your customers with respect, understands what they are going through and won't harass them at all hours of the day.
Rocket Receivables leads by example, fostering a culture where the focus is always on ethical practices and high principles. It also takes data security seriously.
The collection agency meets the data security and compliance standards that are necessary to serve all the markets including banks and government agencies.
Pros of Rocket Receivables
For business owners who don't want to pay a lot for collection services or don't have too much hard-to-collect debt, Rocket Receivables delivers. The flat-rate pricing and tiered level of service in phase one meets the needs of many small businesses. You don't have to worry about hidden fees or extra charges when you hire Rocket Receivables.
It also has an online portal that uses advanced technology to make it easy to add new accounts and monitor existing ones. Searching and running reports in Rocket Receivable's online portal is also easy.
You can search by the average age of the account, recovery rates per account and the cost to collect the debt. To keep customers' data secure, Rocket Receivables uses what it calls a Cyber Security Management System. With it, data is encrypted in transit and there is multi-factor authentication.
That should give business owners peace of mind their data and that of their debtors is secure.
Cons of Rocket Receivables
Rocket Receivables flat-rate pricing makes it a top pick for affordability, but it has some limitations. Its 50/50 split with its contingency pricing plan is higher than the low end of the industry average.
If you want to place a lot of older accounts, more than 120 days past due, with Rocket Receivables it can get expensive.
Therefore, if you need a lot of help in collecting debt, you may be better off with a different service.
There are also limits to what you can achieve in stage one. If your accounts are less than 120 days old, they fall into stage one. It doesn't matter how much debt it outstanding or how hard it's been to collect on your own. If you want to use advanced tactics from day one Rocket Receivables isn't for you.
It's also worth noting that TSI, Rocket Receivables parent company, is not an accredited member of the Better Business Bureau. However, it does have an A- rating. Rocket Receivables doesn't disclose its collection recovery rate, although it says it's four times the industry standard.
Rocket Receivables places a lot of emphasis on educating customers and visitors to its website. The company maintains a detailed FAQ page, posts video tutorials and offers online training resources. It also has a blog that is updated regularly. You can contact customer service via phone, email or by filling out an online form.
Collection Agency (Definition, Characteristics) | How Does it Work?
A collection agency is an agency that is engaged by the lenders and the creditors for the purpose of recovery of the amounts due to them on account of products sold or services rendered by them, that is remaining unpaid by the purchaser for more than a reasonable period of time.
After a creditor has made sufficient attempts for the recovery of the amount due to its from its debtor, it might engage external parties known as a collection agency for the purpose of recovery of the amounts due to it. Once an agency has been engaged, it will make independent efforts for the recovery by taking appropriate steps and actions.
- It is an agency that is used by the lenders and the creditors for the recovery of the debt due to them which are running in default.
- They are covered under the regulations of the Fair Debt Collection Practices Act.
- They get fees a certain percentage basis of the debt owed.
- They have expertise in debt collection and have requisite skills for the same.
How Does Collection Agency Work?
- An agency when hired will make attempts for the recovery of the amount due to the debtors. In case the borrower or the debtor concerned pays off the amount involved as a result of steps taken by the agency, the creditor or the lender who engaged the agency will pay fees on the basis of a certain percentage of the amount recovered.
- In another scenario, if the borrower or the debtor doesn’t pay the amount, then this agency can update the collection status in the credit report of such a borrower or debtor. It will result in a decrease in the credit score of such person and it will become difficult for such a person to avail of loans in the future.
- In order to collect the funds, they may carry out various activities such as calling the borrower over the phone, mailing him, communicating with his relatives or appear at his address.
Getting a collection agency involved in the case of non-recovery of amounts due from borrowers or debtors to become important due to the following reasons.
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- These agencies make use of advance technologies to make direct communication with the defaulter.
- The agencies are very professional in their approach with good data analysis skills.
- They make use of bulk mailing and SMS services and another form of customized communication which is not only effective but also leaves less scope for error.
How are Debtors Getting Paid by Collection Agencies?
These agencies make recoveries for the defaulting accounts on behalf of the debtors. Against this service, the agency is paid for the same on a certain percentage which is based upon the amount of recovery done by it.
#1 – Debt Ownership
- In the case of debt buyers, the ownership of the debt under consideration is transferred to the debt buyer. The debt buyers purchase the debt from the creditors for a discounted amount. It becomes the responsibility of the debt buyer to collect the amount from the debtor in its own name. For the debt recovery, either the debt buyer may make efforts itself or it may hire a third-party agency.
- Meanwhile, in the case of the collection agency, the ownership of the debt remains with the actual creditor only. The collection agency acts as an agent and makes recovery of the amount due on account of the creditor and gets remunerated for the same by the creditor on the percentage basis of the recovery done by it.
#2 – Ageing of the Debtor
- Collection agencies normally collect receivables that are overdue by a maximum of six months.
- On the other hand, debts are bought by the debt buyers that are very old, say about three years old!
#3 – Level of Difficulty in Debt Collection
- The debts that are older are harder to recover. It is why that after multiple attempts are made for debt recovery either by the creditor itself or through a collection agency, the debts are sold to the debt buyers in order to a minimum the loss and recover the minimum amount possible.
- The debts which are not much older are usually assigned to the collection agency. Such debts that are not much older are relatively easier to collect.
- Collection agencies help a creditor in the recovery of overdue amounts from the debtor.
- They are much professional and it is better to involve them instead of making the recovery attempts in-house as it will lead to wastage of time otherwise.
- The chances of getting the recoveries are improved with the involvement of a collection agency.
- These agencies keep a record of each attempt made by them, even if unsuccessful which will be helpful in the future if the creditor decides to sue the debtor.
- Involving a collection agency is usually a costly affair.
- In case the agency does not carry out the communication with the debtor in a professional manner, the customer may be lost.
- Your particular case may not be taken as a priority as the agency will be handling other customers too.
- If this agency becomes harsh in their approach, it may bring negative publicity for the creditor.
the nature of the account and its age, a debt shall be assigned to a collection agency or be sold to a debt buyer after all possible attempts are made for the recovery of the account in-house.
This has been a guide to what is Collection Agency and its definition. Here we discuss characteristics and how does a collection agency work along with its importance and how debtors getting paid from it. You may learn more about financing from the following articles –
FREE Debt Collection Agency | Your Debtor Pays our Costs!
Our service is completely free of charge to the creditor. We enforce late payment legislation and add our costs to the overdue balance to be paid by the debtor. Creditors are not required to pay any commission or fees once we collect payment. Creditors receive 100% of the principal debt owed.
Many debtors pay as soon as they are contacted by our debt collection agency, over 50% of debtors pay within 7 days of our instruction and over 80% of debtors pay within 14 days of our instruction. Creditors receive 100% of the principal debt owed to them no matter if the debtor pays on day 1 or day 14 of our action.
Creditors are not required to open an account with us or pay a subscription fee. All we require to commence action is a copy of the unpaid invoices and a completed instruction form. You will find a link to our online instruction form below, the form can be completed and submitted in minutes.
We combine experience, perseverance and professionalism with expert enforcement of late payment regulations to achieve an industry leading 84% collection rate.
Please read our Independent Reviews!
Find out what our clients say about Advocate’s free debt recovery agency and the results we achieve.
No Cost to the Creditor
Advocate is one of the UK’s leading commercial debt collection agencies. We provide a completely free of cost to the creditor debt recovery and debt collection service.
In accordance with current late payment legislation our costs are added to the outstanding balance to be paid by the debtor and the creditor receives 100% of the invoice sums they are owed as soon as we collect payment.
Creditors do not have to pay to instruct us and there is no fee, charge or commission payable once we collect payment of the invoices. We will have already been paid by the debtor.
Advocate’s average Success Rate is 84%
Our success rate is unrivalled within our industry, over 80% of the invoices we act on are paid within 14 days, and many of those are paid as soon as we make contact with the debtor.
We accept instructions from any business that has issued invoices to another business for the supply of goods or services. If the debt your business is owed is over £750.00 and the invoices were issued more than 30 days ago, we can accept your instruction and collect payment of your unpaid invoices.
No Win No Fee – and when we Win it is the Debtor that pays our Fee
In the small number of cases where we are unsuccessful in recovering payment of unpaid invoices, our client decides if legal proceedings are issued against the debtor or if we close our file. If we are instructed to close our file, there is no charge. We only get paid when we are successful and when we are successful it’s the debtor that pays us.
Advocate is the most cost effective debt collection agency for commercial debts, our service is superior to no win no fee, as there is no fee to be paid by the creditor when their invoices are paid. If we are unable to recover payment of your invoices, at least you will have the satisfaction that you pursued the debtor without incurring any costs.
You can Instruct us in just a few minutes
Instructing us is simple and takes just a few minutes using our online instruction form. Once you have submitted the form, email us with copy invoices or a statement of account and we will commence action immediately.
Advocate’s debt recovery agency process
Once we receive your instruction we will carry out checks and searches to establish the financial position of the debtor, before deciding on the most appropriate course of action.
In most cases demanding payment to prevent the issue of County Court proceedings is appropriate and will result in payment. Businesses rely on credit facilities and trade accounts.
A County Court Judgment would affect both a business’s existing credit facilities and its ability to obtain new credit facilities.
Faced with the prospect of the serious consequences of a Court Judgment, the vast majority of debtors will settle the debt and make payment to prevent the proceedings from being issued.
In some cases the information we have gathered on the debtor will indicate that demanding payment to prevent Court proceedings would not result in payment. It could be that the business is struggling and it is ly that several debt recovery agencies will be threatening the debtor with Court action.
In these circumstances it important to get to the front of the queue for payment by taking the most serious action as possible. Demanding payment to prevent the issue of Insolvency proceedings is a powerful and effective course of action.
Even businesses with cash flow problems that are struggling to pay their creditors will find the money to pay when faced with the prospect of a Winding up Petition.
Notice of Court Proceedings
The process will take a maximum of 14 days. We will issue a 7 day Notice of Court Proceedings followed by a 7 day Final Demand Notice if necessary. The debtor will incur additional recovery costs if they do not pay within 7 days and it is necessary for us to issue a Final Demand Notice. In total the debtor will have 14 days to pay your invoices and our charges.
Notice of Insolvency Proceedings
The process will take a maximum of 7 days. We will issue a 7 day Notice of Insolvency Proceedings. The debtor will have just 7 days to pay your invoices and our charges or face the possibility of being forced into Compulsory Liquidation.
Notices are issued to both the company’s registered address and its trading address. Copies of the Notice will be sent by email to as many recipients that you can provide email addresses for and any additional email addresses that we can trace. We will commence telephone contact with the debtor on the third day of our instruction.
Some debtors will act immediately and will arrange payment as soon as they receive the Notice from our debt collection agency. Around 20% of cases are settled within 48 hours of us issuing a Notice.
In the remaining cases we will continue to contact the debtor on a regular basis to demand payment and describe the serious consequences of failure to make payment. Unfortunately some debtors will not make payment until the expiry date of the Notice, no matter how many times we contact them.
On average around 8 out 10 debtors will settle the invoices in full prior to the expiry of the Notice and the issue of legal proceedings.
Statutory Late Payment Charges
In some instances debtors will attempt to evade payment of our charges. When they receive our Notice they will immediately pay the principal invoice sums, but not the additional charges. All we require in these circumstances is that you inform us you have received payment.
We will then contact the debtor to explain that our charges have been applied under late payment legislation, that they are legally enforceable and that they must be paid immediately. If the debtor refuses to pay the charges, we will issue legal proceedings to recover payment from the debtor.
The debtor will also be forced to pay the costs involved in issuing the proceedings.
A debtor raising a dispute in response to our action will be met with a demand for full details of the alleged dispute in writing and for documentary evidence to substantiate their claims.
If they are unable to provide the information and documents requested we will continue in our action.
When a debtor is able to demonstrate that a genuine dispute may exist, we will supply you with the details provided and request how you would us to respond.
If no dispute was raised at the time the goods or services were delivered or when they received the invoice or when you chased the debtor for payment, then experience tells us that the dispute is in all probability spurious and merely a tactic to evade or further delay payment. Even if the dispute is spurious, we may require further information from you, for example a signed contract, delivery notes or timesheets to prove that no genuine dispute exists and that the debtor has no reasonable grounds to continue to withhold payment.
Please note that if a dispute has been raised by the debtor at any time prior to our instruction, be it genuine or spurious, it is important that we are aware of the dispute and that you include the details in the instruction form.
Issuing legal proceedings
We will only ever recommend issuing legal proceedings if we consider that the action would result in payment.
If our investigations show that the business could fail prior to a Judgment being enforced or if it has no assets that could be seized to satisfy a Judgment or if there are already unsatisfied Judgments registered against it, the costs incurred in issuing the proceedings and the risk involved would be financially unviable. Sadly, in some circumstances the most commercial decision would be to write off the debt in order to claim tax relief on the unrecoverable debt.
If we do recommend issuing legal proceedings there will be a realistic lihood that the action would result in payment of the debt and the costs incurred in taking the action. If the business has a poor credit rating or cash flow issues, it is ly that creditors will have in the past issued legal proceedings against the debtor.
And if there is no history of Court Judgments being registered against the business, it suggests they make settlement once proceedings have been issued.
Similarly a history of satisfied County Court Judgments or of satisfied Insolvency proceedings, suggests they have the ability to settle proceedings and make payment when forced to do so.
Closing our file
In cases where we have been unable to recover payment of a debt during the pre-litigation process, we will supply our client with a recommendation on the chances of recovering payment of the debt through legal recourse, along with concise details on the costs involved in issuing the proceedings and if those costs would be recoverable should our client be successful in Court. If as in some cases the chances of recovering payment are prohibitive or if the client decides to take no further action, we will close our file in the matter.
Advocate Commercial Debt Recovery
Please note, Advocate Commercial Debt Recovery is a Debt Recovery Agency, we are not solicitors.
If you decide to issue legal proceedings, our file in the matter will be transferred to Advocate’s solicitors with an instruction to issue the proceedings in your name and on your behalf.
You will remain our client and we will update you regularly as the proceedings progress through to the conclusion of the case, including enforcement if necessary.
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