Debt collection requires a series of communication and strategic skills that business owners often lack, who rely on the help of specialists and professionals in the sector.
The collection of unpaid debts can be handled by specialized companies that perform the activity completely independently, following the regulations and rules imposed by law.
In this article, we’ll look at some of the key concepts you need to know to proceed with debt collection activities in compliance with the law.
Debt collection: everything you need to know
Debt collection activities include a series of actions aimed at obtaining payment of an amount owed by a debtor to a company. These actions must be carried out in compliance with current regulations and according to the procedures established by the Ministry of the Interior.
Among the measures included in a debt collection plan are telephone, home, and online contact tracing of the debtor, either independently or through debt collection agencies.
Companies that delegate this activity to specialized firms must provide the competent authorities with clear information regarding the debt collection company they have chosen and the exact purposes of the activities performed.
At the same time, it is necessary to verify the identity of the people to be contacted, respecting privacy rules that prohibit the unjustified sharing of certain types of data. For example, it is not possible to share the names or addresses of close family members of the debtor, neighbors, or co-workers.
What are the debt collection activities?
Among the most common activities performed during the recovery of unpaid debts is the use of out-of-court settlements, which avoid litigation and the loss of resources (costs and time).
This is an action that involves the debtor repaying the debt within a short period of time. However, the repayment of the credit may be less than its nominal value, because the debtor may claim to be able to repay only a small portion of the amount owed.
However, this will affect the amount you will be refunded, as debt collection in this way will indeed push the debtor to pay the debt, but the repayment will be much lower than the nominal value of the credit.
In this case, the most commonly used tools are conciliation or assisted negotiation.
Legal action
A second widely used method is legal action, which is based on the documentation in possession regarding the nature and amount of the debt to be collected and involves a series of procedures that occur over time.
Legal action begins with legal documents, first with a formal notice to the debtor, specifying a deadline for payment of outstanding debts. If payment is not made, the proceeding is an injunction and a formal notice of default.
If the debtor’s default continues, the procedure for seizing the assets of the debtor or third parties (eg, guarantors) is activated, up to the point of filing for bankruptcy.
The longer it takes to obtain the outstanding debt, the higher the default interest that will be applied to the debt.
