Debt Collection Agency

A debt collection agency, also known as a collection agency, is a professional organization specializing in the recovery of overdue and non-performing debts.

This form of activity is aimed at facilitating the fulfillment of financial obligations of individuals and legal entities. Most collection agencies operate on behalf of creditors and recover debts in exchange for a commission, typically calculated as a percentage of the amounts successfully collected.

The concept of debt collection agencies originated in the United States. In essence, a collection agency acts as an intermediary between the creditor and the debtor, undertaking the responsibility of recovering outstanding debts in return for a contractual fee. In some cases, an agency may itself become the creditor if the debt is assigned through a legal transfer of receivables (assignment of claim).

The expansion of debt collection practices has led to the emergence of agencies that purchase debt portfolios from original creditors who have been unable to recover them independently. These agencies subsequently attempt to recover the full amount of the debt, and in some cases additional contractual charges. The difference between the purchase price of the debt and the recovered amount represents the financial result of the agency’s activity.

Agencies that acquire receivables (so-called first-party agencies) typically engage in collection activities at early stages of delinquency, when the probability of recovery is highest.

There is also a third-party agency model, in which the agency acts on behalf of the creditor without acquiring ownership of the debt. In this case, the debtor continues to make payments directly to the creditor, while the agency receives a commission agreed in advance. The commission rate typically ranges between 10% and 50%, with a standard range of 15%–35%.

April 11 is recognized as Debt Collector’s Day.

Regulation of Activities

In many countries, debt collection activities are regulated by law, which sets restrictions on methods of interaction with debtors.

For example, in the United States, legislation prohibits repeated calls intended to harass debtors and restricts contact during nighttime hours.

In the Republic of Moldova, there is no specific legislation exclusively regulating debt collection agencies. However, their activities are governed by general civil and administrative law. Actions that violate public order, such as late-night calls, may result in administrative liability.

A creditor’s right (claim) may be transferred to another party by agreement (assignment of claim) or by operation of law. The transfer of rights does not generally require the debtor’s consent, unless otherwise provided by law or contract. However, the debtor must be notified in writing of the assignment. In the absence of such notification, performance made to the original creditor is considered valid discharge of the obligation.

Debt collection activities are carried out on the basis of a contract, which may take the form of an assignment agreement, agency agreement, or service agreement.

Operational Practice

The Director of GCS-Moldova, Mr. Baragan Serghei, describes the company’s operational approach as follows:

“We do not use aggressive or unlawful methods. Our focus is on amicable, pre-litigation resolution. The primary objective is to inform the debtor of the outstanding obligation and the potential legal consequences.

If the debtor acknowledges the debt but temporarily lacks financial capacity, a reasonable period may be granted for repayment or a structured payment plan may be agreed.

If amicable resolution is not possible, the case is referred to court. Enforcement is then carried out based on an enforceable title issued by the court.

If the debtor has no seizable assets, this is formally recorded in accordance with legal procedures.

Where appropriate, we facilitate restructuring agreements between the creditor and the debtor. The main objective of our activity is effective debt recovery, not punishment.”

Telephone Communication

Telephone calls are one of the primary communication tools used in the early stages of debt collection (Early Collection). This stage includes remote communication methods such as phone calls, SMS messages, and written notices aimed at informing debtors and encouraging voluntary repayment.

Scope of Authority

Debt collection agencies operate within legal boundaries and in accordance with principles of fair practice.

Collectors are not permitted to use offensive language, misleading statements, or unlawful pressure tactics. They are required to properly identify themselves and clearly state the purpose of the communication.

Agencies may collect and process debtor-related information for the purpose of improving recovery efficiency, provided that all applicable data protection laws are respected.

Stages of Debt Collection

The debt recovery process generally includes the following stages:

• Soft Collection — amicable pre-collection phase (calls, SMS, notifications);
• Hard Collection — direct contact, including personal visits;
• Legal Collection — court proceedings and enforcement actions.

Field Visits

During the Hard Collection stage, field specialists may conduct visits to debtors in order to facilitate resolution of outstanding obligations.

Such activities may include:

• informing the debtor of the outstanding debt amount;
• explaining the legal consequences of non-performance;
• identifying reasons for delay;
• agreeing on repayment terms;
• inspecting pledged or secured assets where applicable;
• documenting relevant findings in accordance with legal procedures.