What is the Debt Collection Process
by Rose Flores, Account Executive, Debt Recoveries Australia
If you have recently outsourced to a debt collector, or have been contacted by one, you must be asking yourself – what is it that debt collectors actually do? Don’t worry, we get that a lot. Here is our step by step process for debt collection.
Initially, the debt collection process starts when a debtor fails to settle an unpaid account with a creditor. Debt collection enables creditors to recover outstanding debts without incurring additional costs. Our clients outsource their debts to us and we collect a commission upon claim. Our clients may not have time to collect the debts themselves, so they outsource to debt collection professionals.
As a debt collection agent, I have summarised below some steps we normally follow in our debt collection process. Take note that many cases are unique and may not necessarily observe this procedure:
- To collect as much information as we can to locate the debtor and understand more about the debt. Sometimes, a debtor will be unaware of an outstanding debt and will only know it exists once a debt collection agency gets in touch with them. A common reason why a debt may be transferred to a debt collection agency is primarily because the creditor could not reach the debtor. This can occur either the information provided were not updated or incorrect contact information in their files. We will try to obtain accurate and complete records using advance skip-tracing tools and even private investigators, in order to obtain the updated contact details.
- To contact the debtor and try to collect the outstanding debt. Communication is usually made by postal mail, telephone or email. We formally demand repayment and give a time frame of 14 days, to either settle the debt or contact our office for negotiations. The debtor is advised that no response may result to take further action. Usually payment is made by this time, or a liquidation arrangement is in order.
- If we are unable to make contact, follow up our initial contact attempt by postal mail, telephone or email. If we still haven’t received any response or repayment within the given time we can send a final notice letter, which advises the debtor that ignoring the matter could result in a court judgment. This letter will outline potential consequences of a court judgment such as changes in your credit rating, seizure of property, and bankruptcy proceedings.
- If in case we are unable to make contact, despite numerous attempts, use a number of tools at our disposal to obtain up-to-date contact information of the debtor. Some other avenues that are explored may be conducting enquiries into the owner of a property or vehicle, sending out a field call agent, or hiring a private investigator. These actions may incur extra charges and depending on the circumstances of the debt, our client may be able to include these costs on top of the original debt amount, for that matter. As a result, we believe that it is in the interest of both the debt collection agency and debtor to work together as ignoring debts do not benefit either party in the long run.
- Legal Action. In this stage, we have not been able to contact the debtor or agree on payment terms. With our client’s instruction, we can issue a Legal Letter signed by our solicitor to provide a final written warning before recommending litigation. This letter will again outline the possible consequences of non-payment and advise that any additional costs that are incurred may be added to the debt owed.