Despite the earnest effort of creditors, there are times when a business needs to resort to hiring a debt collection agency. Unpaid debt impacts the business financially and has a long-term effect on the company’s profits. Nonetheless, hiring a debt collection agency is not always the first step. More often than not, a company prefers to protect the customer-client relationship rather than have a third-party takeover. If you are considering hiring the services of a debt collection agency, here are tips to guide your decision.
Choosing a debt collection agency
Finding a debt collection agency to trust is a daunting task. There are many horror stories of debt collector misbehaviour where customers have been harassed. There are also some unreliable agencies that charge exorbitant fees even before they start collecting overdue payments.
The first mark of a good debt collection agency is the feedback from previous and existing clients. A well-established agency will provide you with references, and you need to contact them personally to verify that their feedback about the company is legitimate.
Another indication that an agency is reputable is that they are registered with the Financial Conduct Authority. The UK debt collection industry adheres to regulations set forth by this institution. Anytime you find an agency that is not registered; you need to look elsewhere.
Beware of agencies that ask you to pay an upfront fee for their services. The agency should only charge you for every debt they successfully collect. When an agency adheres to this rule, they are likely to have a higher success rate because they will not get paid unless they obtain payment.
Lastly, do not forget to carefully review the terms and conditions of the services provided by the debt collector. Before you sign a contract with the agency, make sure that you agree with all the terms stipulated in the contract.
How is debt collection governed and controlled?
Creditors need to be aware that debt collection agencies do not have absolute power in going after debtors. UK law prohibits specific actions during the debt collection process. Every effort by a debt collector when performing their duty needs to comply with FTA, FCA, and OFT. In general, these are actions that debt collectors are prohibited from doing:
- Contact the debtor at their place of work without permission
- Use social media channels to contact a debtor
- Contact debtor outside working hours and working days
- A debt collector cannot reveal the nature of the call to an employer or family member
- Collect additional charges not stipulated in the contract
- Threaten the debtor with false claims such as fake court action
- Harass the debtor to pressure them into making payments
A duly registered and compliant debt collection agency will always adhere to the guidelines of UK debt collection. Any proof that a debt collector is engaging in improper practices will be subject to punishment by UK law. As such, a creditor needs to ensure that they are only hiring a reliable and reputable debt collection agency.
