As we know, debt is probably the biggest financial issue of modern society. However, we often only look at it from one perspective – that of the person who is in debt. This is only natural since those who all money are the ones who were initially in financial trouble.
There are many different ways, services and methods designed to help people who are carrying multiple financial obligations. But even with all the available tools, there are many people out there who still, for one reason or another, struggle to make their payments and ultimately fail to repay what they owe. It would definitely not be good to be in the shoes of those people. However, when there is a financial transaction, like when a person borrows from a loan lending company, there are always two sides. When the loan that the borrower is taking is unsecured (there is no property used as a collateral to back the loan), the loan lending company is also at risk of losing money.
So what happens when a consumer fails to repay his unsecured loans? There has to be a way for the loan lender to collect what is owed to him, right? Correct. Just like there are services and solutions that are designed to help people to pay off their debts, there are services and solutions created to enable loan lending companies collect the money that the consumer could not repay. These services are known as debt recovery solutions.
In the this article, we are going to focus on the services and solutions that loan lending companies can take advantage of to acquire the money that is being owed to them by the consumers. When the two sides are signing a contract, they both carry the legal responsibility of sticking to that contract, and if one of the sides goes out of line, it is only natural for the other to find the means needed to correct the wrongs.
What exactly are the debt recovery solutions?
Debt recovery solutions are the methods and tools of a process of debt recovery used for a successful collection of the amounts of bad debts. Bad debts are financial obligations that have been written off as being uncollectible debt by the original creditor. These solutions serve as part of the procedure of approaching debt collection by using different tools for recovery. Debt recovery companies and agencies do offer debt collection solutions which are part of the overall process of debt collection and also part of the debt recovery services that are being offered by these agencies. If the process of debt collection is successful, the loan lending company that is trying to collect may be able to have a profit and increase its cash flow.
What are the different collection methods and solutions for recovering debt?
DCA (debt collection agency) uses solutions for the recovery of owed amount of money that may involve different techniques of communication and tracing, along with legal and pre-legal actions. These actions may then lead to a successful end result of the debt collection process. Depending on the debt collection agency’s policy, providing these methods and solutions normally requires payment by either the debtor or the creditor. Now let’s discuss some of the methods and solutions that debt collection agency uses to recover what is owed to the creditors.
Tracing and tracking methods
Tracing and tracking methods are the default solutions that collection agencies use for money recovering. These methods are generally being used in order to locate and contact the debtor, also referred to as the consumer. After the subject of debt has been found, the money collecting agency will contact the debtor. The agency will do that by using a number of communication tools, such as phone calls (the calls will normally be made within the time frame between 9am and 8pm, from Monday to Friday), official reminder letters, voice messages and others. These methods of contacting the debtor are mainly known as multichannel communications financial obligation recovery solutions. In some cases, the consumer is nowhere to be found, and so in such situations, the money collecting agency is legally allowed to contact the consumer’s family members and employers. However, this is only possible if the matter of the call stays classified.
These letters are normally a part of the collection process from the very beginning. The first one to be sent to the consumer are general reminders. If the consumer does not respond to these general reminders and there is not any debt collection result, the next step is the sending of letters of demand, which will be used as a solution for the recovery of the money that is owed. These letters may be a bit different depending on the specific situation. They are normally lined up like this:
- Harsh reminder
- Final reminder (this is the last letter before further action is taken)
- Small court claim informative letter
All these letters have a formal and polite tone.
In-home visits are another tool for collecting financial obligations. They are performed by enforcement agents, bailiffs or collection solicitors. The recovery bailiffs and attorneys are legally allowed to seize a part of the consumer’s possessions and belongings. After that, they can normally sell them at different auctions and with that, settle the full amount of the debt. These agents, however, normally prefer arranging another payment with the debtor rather than use actions of force. This part of the process is known as debt negotiation, and that is also a part of the solutions for collecting debt. Basically, with a debt negotiation, the debt recovery agency offers the consumer a convenient repayment plan for his financial obligations to the creditors. The debtor can either make a number of small payments, scheduled over several months, or he may choose the option of making a single large payment with which to settle all the owed amounts all at once.
In case the pre-legal actions that we have discussed above lead to a negative final result, the next step of the debt solution process for collecting financial obligations may include court proceedings. The collection agency needs to send one final note to the consumer before leaving the case in the hands of the court. The purpose of this final note is to inform the debtor that he is to face legal action. The note should also specify the exact date on which the process will begin. Taking legal action is the last thing that financial obligations recovery agencies use as a method for collecting what is owed to the creditor. After that action, the case will be handled by the court and the consumer will no longer have any communication with the collection agents. He will only be contacted by the official court representatives.
The purpose of a debt collection agency
The purpose of this agency is not only to collect the full amount of money that is owed to the creditor, but to also use legal recovery methods. This is done so that the business relationship between the consumer and creditor can be preserved.