Debt collection is a process by which any payments owed by debtors is pursued. The collection is done on an individual level or through a third party called a debt collection agent. Therefore, a debt collection Agency performs the duty of collection debts owed by individuals or corporate organizations to ensure that delinquency management is well managed and prevents loss of funds from the business owners.

The debt collection agencies collect all types of debts ranging from personal loans, credit card loans, student loans, automobile loans, utility bills, among many others. Their main aim is to reduce the pressure experienced by business people when collecting such debts. They specialize in all types of debts to remain relevant in the market and beat up the competitors.

Before analyzing how they work, there are a few points that one should note upon hiring debt collectors or even when thinking of hiring any;

  • There is a specified fee that the debtor should put aside to pay the agencies as they engage in the collection business.
  • Some of the debt collection agencies are advocating themselves, and as such, they work independently as per their terms and conditions.
  • The collectors can negotiate the terms of how the debt will be settled with the consumers. This is done to ease the burden between the collector, the consumer, and the business owner while analyzing each of them’ financial capability.
  • Local rules have been put in place by the government to protect the consumers, mostly those who have had challenges in meeting their debt obligations. An example is during the Covid 19 pandemic, where business was shut down, and the economy’s curve went down.

With these points in mind, it is now possible to explain how a Debt collection Agency works. This article will explain in detail and give an overview of the entire debt collection process’s entire operations.

Essentially, debt collector agencies act as middlemen to collect those overdue debts for a long period. Those who do not show signs of repayments—businesspeoplehandover such difficult clients to the agencies for the debts accumulated for 60 days and above.

Before the onset of the activity, the business owner (Creditor) pays the agency a certain percentage of the debt’s overall fee agreed-upon collection.   Collection efforts take place from that time, depending on the type of debts in question. In the event of an encounter with difficult customers, even after negotiating an amicable payment plan, the debt collectors have the right to escalate the issues to lawyers.

In such circumstances, the main purpose of the lawyer is to file lawsuits to demand the debtor to pay the amount he owes and has refused to pay.

How Debt Collection Agency Work in Singapore

While it’s imperative to have a good delinquency management process, debt collection can be a delicate issue. It ought to be handled with care and ensure that relationships are well managed. This is for the sake of future business with the debtor. In Singapore, Debt collection is not all about collecting the due monies. Still, the debt collectors go a further step to educate business owners and consumers on financial management strategies to run and operate efficiently. This has seen Singapore deliver outstanding results in debt management. The government and law enforcers have continuously encouraged all debt collection agencies to see that financial education is a continuous process for a quality portfolio.

Are there Agencies that Buy Debt?

Agencies do not necessarily buy debt. However, they search for debt buyers who agree with the creditor and come up with a specific figure to sell off the debt; the figure is arrived at by cutting all losses from several customers who have failed to pay.  In most cases, the newer the debt has the likelihood of being purchased by the debt buyer. This is because the likelihood of collecting such is easier than collecting an old debt altogether.

An example of an easily purchased debt is the Mortgage debt where a debt buyer takes over the house and pays the amount of debt in question, but the agreement is that all the proceeds are forwarded to the debt collector, who will, in turn, pay the creditor.  The debt collecting agency takes the percentage of the fees agreed upon and remits the mortgage payment balance to the creditor.

This process bears high profits to the debt collecting agencies, and the more they can sell the debts, the more profits they realize.

How Debt Collection Agencies reach out to the Debtors

The most effective ways that debt collectors have used in the past is by writing demand letters to the debtors and making phone calls.  Suppose they are unreachable using the contacts they gave at the time of being indebted. In that case, they extend their search by using private investigators todetermine whether they have other bank accounts that can repay the loan. Apart from this, the debtor is forwarded to credit reference bureaus who negatively list them.

This becomes even a more serious issue bearing in mind that their credit score is compromised and may not get any credit facility in the future.

Exceptions for failure to repay the debts

Depending on the debtor’s condition at the time of demand, the debt collecting agencies can recommend whether the consumer can repay the loan at a future date by giving moratorium advice or if the consumer is failing topay deliberately. They can as well recommend a public auction to recover the debt.

When Covid 19 struck the worldin February 2020, most countries instituted local rules to protect consumers who had debt challenges, and when the economy went down, they could not pay effectively.  Singapore was not left out in instituting measures to protect consumers during the turbulent times when Covid 19 pandemic is still in place.

Benefits of Using Debt Collection Agencies in Singapore

Business owners who use debt collection agencies in Singapore have experienced numerous benefits. Some of them include;

  • Reputable agencies are run by professional and reliable staff who will see that every coin is collected, and no losses are incurred.
  • It also saves time by tracking any overdue invoices, sending them to the debtors, and ensuring they are paid on time.
  • Offer Security- The managers offer security through all collection efforts rather than carrying it on your own, which could be a risky business.