Services Offered by Debt Collection Agencies
A debt collection agency is a company that deals with the recovery of outstanding debts on behalf of other firms or individuals. Companies can either occasionally use, or subscribe to the services of a collection agency. A collection agency may provide services for a fee, or buy the entire claim by assignment or through the establishment of a lien. For an assignment notice to the debtor is required.
The legal form of a debt collection contract is usually a management contract with a service character. Often collection agencies work together with private investigators and/or law firms.
In order to enforce open claims through enforcement actions with the help of the bailiff, the collection agencies may need an enforcement order. This can be achieved by action in court or the court order for payment. In a number of jurisdictions debt collection companies can without assistance of a lawyer carry out the court order for payment.
There are two types of debt collection businesses:
– Creditors assign the debt collection agency to collect its receivables from the debtor on their behalf. The collection agency is then due to a power of attorney of the creditor.
– The creditor sells its demand (usually with a huge discount) to the collection agency. The debt collection agency then acts on an assignment statement of the principal.
Typical operational methods of collection agencies involves the debtor being contacted by repeated postal, telephone or personal reminders for payment. With the help of the bailiff bring about a seizure, and in particular request a warrant to secure the release of the sworn statement. Informing the defendant about possible legal consequences of his default.
The collection agency can recommend to the court the attachment of debtor’s valuables, such as jewelry or bank funds concealed by debtor. The agencies can activities can involve recycling of loan collateral and the negotiation and unwinding of installments, deferred payment, settlement agreements and tracing the whereabouts of debtors.
Some collection agencies are divisions of law firms that specialize in the recovery of debts, and work as efficiently and cheaply as the large debt collection companies, or even better. This may be due mainly to the latent psychological ‘potential threat’ attorney letterhead, which can be more intimidating, thus compelling debtor to respond.
Debt collection agencies may provide credit profiles to clients. This is based on information that companies need in their credit management activities. And it can pertain to public information on bankruptcies, and (legal) debt restructuring. This provides the client with an idea of the company or individual’s credit worthiness.
A collection agency is often confused with the bailiff. A bailiff has more powers than a collection agency and its actions are protected by law, meaning that not everyone can simply operate a bailiff agency.