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A collection agency, also known as a debt agency (from the English collection – collection) – an agency that specializes in collecting overdue receivables and bad debts;
a form of business whose purpose is to facilitate the payment of debts of individuals and legal entities. Most collection agencies exist and operate as lender agencies, and collect debts for remuneration, which is formed according to the amount of collected financial resources in the form of payment of predetermined percent of the total amount.
The concept of a collection agency came to Russia from the United States of America. In fact, the collection agency is an intermediary between the creditor and the debtor, taking on the obligation to carry out work to repay the debt for a certain percentage. Often, the agencies themselves can act as a creditor when the original creditor assigns the right to claim the debt to the agency under the assignment agreement, that is, sells the debt.
The first collection agencies in Russia were created as subsidiaries of banks and worked exclusively with their debts. Such, for example, was the Agency for the collection of debts at the Russian Standard Bank, registered in 2001 [2]. Actively, specialized collectors began to enter the open market relatively recently. Collection agencies appeared on the Russian market of services in 2004. The first collection agency in Russia – CJSC FASP – was registered on August 9, 2004 [3].
The increased number of agencies (sometimes associated with the public as “debt buyers”) acquires debts from creditors who for one reason or another have not been able to collect them on their own for a certain percentage of the total debt, and then collect the entire amount or even the amount plus “ interest ”in addition to the general balance [4]. Lenders, who are usually financial institutions and large trading networks, send debts of their credited users from the group of receivables; the difference between the amount received and the total value of the debt is written off as a loss. Debt management agencies (First Party agencies) are usually connected to the return of debt at an early stage of delay, since at this time the likelihood of resolving the conflict increases with the least effort and time, and are characterized by the highest intensity of efforts aimed at achieving this goal [ 5].
There is a second scheme – a collection agency works with a creditor financial institution without concluding an agreement on the repayment of debts (the English Third party agencies); according to this scheme, the debtor still makes payments on the debt to the creditor organization, and the debt agency receives a fee in the amount of a specified percentage of the total amount collected. In accordance with the type of debt recovered by the agency, the amount of interest ranges from 10 to 50%, although the standard is the amount from 15 to 35% [5].
The collector day is created – April 11th.
Activity regulation
In many countries, collection agencies are limited in their rights by law prohibiting certain annoying acts against the debtor. So, in the United States, the collector does not have the right to call repeatedly to annoy the debtor, forcing him to pay off his debt to the creditor [6]; cannot call at night [6]. In the Russian Federation, there is no specialized lawmaking in relation to this area of activity [6], however, all actions of a collection agency are consistent with the location of the agency in the legal field of the Russian Federation [6]. So, when the agency calls the debtor at night, the question may arise about the administrative responsibility of the collector for the deed, as there is a possibility of breaking the silence at night [6].
According to Rospotrebnadzor, collection activities have no legal basis, and if a bank transfers the right to claim a debt to a collection agency, then such an action is illegal, as there is a significant violation of the rights of borrowers [7] [8]. The collectors themselves, in this case, are regulated by the Civil Code of the Russian Federation, namely, 382 article, which states [9]:
The right (claim) owned by the creditor on the basis of the obligation can be transferred by him to another person under the transaction (assignment of the claim) or transferred to another person on the basis of law. The rules on the transfer of creditor rights to another person shall not apply to recourse claims.
To transfer creditor rights to another person, the consent of the debtor is not required, unless otherwise provided by law or contract.
If the debtor was not notified in writing about the transfer of rights of the creditor to another person, the new creditor bears the risk of adverse effects caused by this. In this case, the performance of the obligation to the original creditor is recognized as the performance of the proper creditor.
Collection activity begins with the conclusion of the contract. Such an agreement may be a contract for the transfer of debt, agency services, and the provision of services.
Practice activities
The chairman of the board of directors of the company “Center YUSB” and the head of the collection agency of the same name, Mr. Alexander Fedorov, speaks about the methodology of activity, in particular, the practice of visits to the debtor by representatives of the collection agency [10]:
Well, of course, with bats and soldering irons we don’t go to people. Only the psychological effect on debtors is used. To begin with, we are trying to collect the debt without bringing the case to court. And our first task is for the debtor to listen to us, that is, to find out all the steps that we are going to take. Of course, first we listen to all his arguments, since it happens that the debtor can present documents on payment, and this means that the failure did not occur with the client.
But if the debtor says “yes, I must, but there is no money,” then we give him time to find the means. Then we again initiate a personal meeting (we come to his home or to work), but no waving occurs, the maximum that we can do is strictly look into his “honest eyes”. If this does not help, then the matter is decided through the court.
And then we come to him already with a writ of execution or a court order, and the debtor “gets” another 7% of the amount that the bailiffs will collect from him. Again no result? Then we are compelled, together with bailiffs, to make an inventory of the property of this person. If the debtor also shows character, and the “Act on the impossibility of recovery” is drawn up, which confirms that he has no money, we will have to turn to law enforcement agencies and fight it already in the criminal law. Yes, of course, if a difficult situation arises, and a person is ready to repay the debt, but, for example, something was robbed or something extreme happened, then we act as intermediaries between the bank (or other organization) and the debtor and seek installment plans. After all, our task is not to recover everything today, but to recover in general.
Phone calls
IP-telephony is one of the most common ways to communicate with a debtor.
Telephone calls are used by collectors at an early stage of collection (English Early Collection) – this stage is characterized by softer arguments used by collectors when working with a debtor / guarantor in relation to the next stage of debt collection.
The Early Collection stage is Soft Collection – the initial stage of work with overdue debts, including the procedure for conducting remote (phone calls, sending SMS, letters of notification of debt availability) contacts with debtors and guarantors aimed at paying off debt. At an early stage, collectors inform debtors of their obligations to pay debts and are called upon to motivate the fact of payment. The actions of the collection agency are governed by the laws of the country by the place of stay of the agency itself, as well as obligations voluntarily undertaken by the collection agency.
Agency action credentials
There are certain restrictions on the actions of the collector. So, the collector does not have the right to use obscene expressions when calling the debtor, in most cases it cannot allow aggressive voice intonation. The collector, as a rule, should not mislead the debtor in order to force the payment, cannot threaten arrest, and must inform the debtor of his name and surname, company name and purpose of the call [11].
In rare cases, the collection agency initiates calls to the debtor in his native language, if the language differs from the state and common in the region or country. This is done for the reason that lack of knowledge of the language of the host country is often used by a foreign debtor as an explanation of the fact of non-payment of debts. A collection agency has the right to collect information about the debtor in order to optimize the debt collection process – for example, the agency has the right to analyze answered calls to the debtor in order to make subsequent calls at a time when the debtor is most able to communicate. Also, some collection agencies practice collecting personal information about the debtor that is not included in the list of data communicated by him himself – for example, a changed phone number, address of residence and location, work contacts.
Unlike the legislatively regulated actions of collection agencies in the United States, Russian collection agencies are not limited to a ban on making phone calls solely on the basis of such a request from the debtor, and are not limited to the collection and use of personal information. Indirect restrictions on such activities are partially present only in the civil and criminal laws of the Russian Federation. Also in the USA, according to the laws contained in the FDCPA, the agency does not have the right to make repeated calls to neighbors and relatives of the debtor in order to motivate or force them to make the debt payment, but can only call them once, despite possible suspicions of giving these persons with incorrect or incomplete information about the debtor [12]. Also, according to this legislation, with a separate question about the name and surname of the collector, as well as the name and surname of the person who hired him, the collector must give an answer to it [12].
In the event of the death of the debtor, his relatives are not obligated to pay the deceased’s debt to the bank or agency, with the exception of cases when the deceased’s property has entered into the inheritance [13], but in the USA the deceased’s property can be used to pay off debts [14].
Departures of specialists
As a rule, departures of specialists take place at a later stage of debt collection (Late Collection) – this stage is characterized by more stringent arguments used by responsible specialists when working with problem debt. The stages of the Late Collection are:
English Hard Collection – the second stage of work with bad debts, the next after the Soft Collection stage, including the procedure for conducting contacts with debtors and guarantors (including meetings, searching for a borrower by place of residence, work, etc.), aimed at paying off debt;
English Legal Collection – the third stage of work with distressed debt. At this stage, in order to recover the debt, coercive measures are applied to the debtor.
The main task of field specialists is to ensure the maximum return of problem debt. Field Specialist:
brings to the attention of the Borrower / Surety / Pledger the amount of debt, indicates penalties (depending on contractual obligations);
explains to the borrower, guarantor or pledger the consequences of non-fulfillment of his financial obligations (the collection agency / Bank will file a lawsuit in the court to collect the debt, and the borrower and / or guarantor will incur legal expenses);
ascertains the causes of arrears;
takes (if possible) from the Borrower an Explanatory Note on the fact of late payments;
determines with the borrower or with the guarantor the date of payment to pay off the overdue debt;
if possible, inspects collateral / other property, draws up the relevant act, leaves a notice of the presence of debt.
Source: ru.wikipedia.org