Your Guide to Understanding the Process
Debt collection companies are necessary elements in the world of finance and law so there are always many questions about it, like what is debt collection, what do debt collection companies do, how do debt collection companies make money, What is the success rate of debt collection agencies and What happens if you ignore debt collectors?
So let’s go through the world of debt collection to answer all these questions in this article.
What are debt collection companies?
Before discussing what debt collection companies are, we have to discuss what the debt is.
The debt is the amount of money borrowed from an individual or a company to another individual or company. The first party owing the money is called “the creditor,” while the second party who borrows the money is called “the debtor”.
Each debt must be fully repaid after a specific period, the day of the repayment is sometimes called the “loan maturity date”
If the debtor doesn’t repay the full amount of the debt by this day, the creditor has the right to request the debt’s payment, this process of pursuing debt repayment is called “debt collection”.
This debt collection is sometimes a very complex and time-consuming process so the creditor may be unable to proceed with it by himself, here appears the role of “debt collection companies”.
Debt collection companies are independent firms dedicated to helping creditors recover their outstanding debts with the most appropriate strategy for a specific cost or a percentage of the recovered debt.
What do debt collection companies do :
Debt collection companies work as intermediaries between the creditor and the debtor to recover overdue debts through several methods. These are usually categorized into two key services: amicable debt collection and legal debt collection services.
How to collect Debt Amicably :
The amicable solutions of debt collection can be categorized into two key phases: contacting the debtor and negotiation
The amicable Debt Collection :
It includes all the amicable attempts of debt collectors to recover the debt, These attempts start with professional communication with the debtor via any of the available contact information so they may call him, send an email, or even arrange a visit to the debtor if necessary.
The core of the amicable collection is negotiation since the agency tries to reach an acceptable solution for the two parties, especially if the debtor has financial hardships and can’t repay the whole sum of the debt.
It is to be mentioned that communication and negotiation with the debtor always occurs ethically which guarantees a legally secure position for the creditor, besides maintaining good relationships with customers.
The Legal Debt Collection :
It comprises all the legal measures that could be performed by the attorney in the debt collection process which usually begins with sending a legal notice to the debtor, and if he doesn’t respond the attorney can file a lawsuit in courts and obtain a court judgment.
How do debt collection companies make money :
Debt collection companies can make money in various ways depending on the business model they follow.
Some collection agencies make money from commissions on the recovered debt. The percentage of this commission differs from one company to another, but it is usually between 15% to 40% of the recovered debt, and also in some cases, the company may charge a minimal advance payment.
Other companies determine flat fees for each case, these fees are paid whether the debt is recovered or not.
Furthermore, some cases may require extra fees for court proceedings, while others may be included in the main fees.
What is the success rate of a debt collection agency ?
Debt collection companies have different success rates since debt recovery success depends on various factors pertaining to the debt, the creditor, the debtor, the country, and the collection company.
For instance, the debt age is one of the most influencing factors on the success rate of the company, because the older the debt is, the harder it is to be recovered.
Also, some debts are easier to recover because of the nature of the industry that they have emerged from, while other industries are known to have lower success rates.
Another crucial factor is the debtor’s financial situation, which affects the possibility of debt recovery and the repaid percentage of the debt.
Besides this, the quality of the collection service offered by the agency really matters, so each company has its own success rate.
What happens if you ignore debt collectors ?
Ignoring debt collection companies may lead to unpleasant consequences since they will attempt to recover the debt in more serious ways.
Firstly, it’s important to understand that debt collectors operate within strict legal guidelines. They cannot harass you with excessive calls, nor can they contact you at inappropriate hours. Additionally, it is illegal for them to threaten you or engage in unethical behavior.
However, debt collectors are legally allowed to call the debtor and try to collect their client’s debt, so the borrower shouldn’t ignore their calls, emails, or letters.
If the debtor ignores debt collectors totally, they will escalate the case to court to recover the debt, in the case of obtaining a court judgment the debtor may suffer from wage garnishment, freezing account, seizure of property, and many other legal consequences.
Quick Action: one of the top debt collection companies in Dubai
Our agency “Quick Action” is one of the leading debt collection companies in Dubai, we have more than ten years of experience in collecting debts in the UAE with high success rates that reach 80% of our cases, and we perform all the necessary procedures to assure the rights of the remaining 20% percentage.
We work as a third-party mediator between the creditor and the debtor to collect the delinquent debt, we are totally compliant with ethical and legal regulations during the debt collection process to secure a good legal situation and good commercial relationships for our clients.
Additionally, our debt collection service is reinforced by the legal expertise of “Dr. Ahmed Al Ramsy Advocates & Legal Consultancy” a prominent lawyer and legal consultant in Dubai, so we can handle all the intricate legal aspects of our cases.
Eventually, debt collection companies are extremely useful for both the creditor and the debtor, which affects the whole financial stability of the country so the “Quick Action” debt collection agency in Dubai is always here to assist you recover your due debts.