When to use debt collection and what to do if it fails
by David Carter on 01 March 2010
When a company has exhausted their own procedures for collecting unpaid debts, they may turn to a debt collection agency to take things forward to the next step. Many debt collection agencies are successful, but they don’t succeed every time.
A debt collection agency will primarily write letters, make phone calls and follow a process that is office based to recover debt. They may visit the debtor, but the Office of Fair Trading guidance states that they must give adequate notice. For example, if the debt collector arrives unannounced, they may not pressurise the debtor into the discussing the debt there and then. If the debtor wishes to arrange for them to return at a later time, the OFT says this must be agreed to (agencies should be licensed by the Office of Fair Trading). Debt collectors have no powers of entry or seizure.
If the debt is either a fairly small amount or the creditor believes that the debtor is just delaying or trying to wriggle out of payment, but will pay if a little pressure is applied, then debt collection may be the best route.
But for those harder to recover cases, all is not lost.
You will need to take action to get a county court judgement and then have it enforced. The enforcement could be by certificated bailiffs (for commercial property and rent issues), county court bailiffs or high court enforcement officers (HCEO). I have written an article about the difference between county court bailiffs and HCEOs.
However, I would add a note of caution to not leave things for too long before you take further action if debt collection isn’t working. If someone else gets a judgment before you, theirs will take priority; if the debtor is struggling, they may be about to go out of business and have few, if any, assets to enforce against.
If it’s a large debt and you have concerns, you might want to go straight to a judgment and prompt enforcement.
In terms of fees, with debt collection, the creditor pays the debt collection agency’s fees, generally on a per letter/phone call basis and/or a percentage of the debt recovered. If the debt collector is unsuccessful in recovering the debt and it is transferred to the courts for a judgment, then reasonable and genuine costs incurred through the debt collector may normally be added to the debt for recovery (as well as interest).
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Disclaimer: The statements and opinions expressed in this article are those of the author and do not necessarily reflect those of Sheriffs High Court Enforcement Ltd, trading as The Sheriffs Office. Sheriffs High Court Enforcement Ltd does not take any responsibility for the views of the author. The author will not be held responsible for any comments posted by visitors to this site. Please note that this article does not constitute legal advice. The author has used his best endeavours to make this article as accurate and complete as possible, but requests that the reader be aware that the law of England and Wales frequently changes. The author strongly advises the reader to take legal advice before embarking on any enforcement action.
