Many people feel anxious upon receiving a letter from a collection agency. The situation is unfamiliar, and the person concerned does not really know what to expect during collection proceedings. In principle, however, a collection procedure is not cause for concern. The article below explains the usual process for collection proceedings and what debtors should pay attention to.
Collection is defined as the commercial collection of due claims. This means that, first of all, a due claim towards a debtor forms the precondition for a collection procedure. Such a claim can be based on a purchase on account through mail order or on a service agreement in the mobile-phone sector. The important aspect for the collection procedure is that a company has performed a service and, as a result, it is entitled to payment. This lawful claim is based on a contract or an invoice. If the customer does not pay even though the amount has already fallen due, most companies initially respond by sending out a payment reminder. However, they are not obliged to do that. This is only an act of goodwill to the customer. This reminder informs the customer of the fact that the due claim is still outstanding and, as a result, it gives the customer the opportunity to fulfil his/her payment obligation.
Before a company institutes collection proceedings, it usually sends out two further warning letters in addition to the first payment reminder. However, it is not obliged to do so. The customer has defaulted upon the first reminder - and, in some cases, even before that. This gives the company the right to commission a service provider to collect the outstanding account and, therefore, to initiate collection proceedings.
As soon as the order has been issued, the collection agency becomes the debtor's first point of contact in all respects. During the collection procedure, the debtor should address all open questions to the collection agency rather than to his/her original contract partner under the transaction. The same applies to payments. These should be made to the account of the collection agency to ensure that they can be properly allocated. This is the only way to promptly conclude the collection procedure without any further complications.
The first step of collection procedures is an examination of whether the conclusions drawn are warranted. During this examination, the service provider checks the claim which it is to collect for its customer and determines whether the account is justified. In the further course of the collection procedure, the debtor receives a request for payment that states the amount of the creditor's principal claim as well as any possible accessory claims. At this point in the collection procedure, the debtor should check the claims referred to: Are these justified? Has the due amount perhaps already been transferred? Is the invoice really still unpaid? In case of questions or need for clarification, the debtor should immediately contact the company taking care of the collection procedure.
If he/she arrives at the conclusion that the claim asserted is still outstanding, he/she should remit the funds to the account referred to in the request for payment as soon as possible. In this context, it is important that not only the principal claim is paid. The accessory claims and the collection costs also have to be paid by the debtor. If not paid, the collection procedure cannot be concluded. Irrespective of the further process of the collection procedure, it is important that the debtor contacts the collection agency. Ignoring the request for payment is the worst choice, as, in the medium term, it will only lead to further escalations in the collection procedure.
If all efforts to contact the debtor fail, court dunning proceedings constitute the logical next step of the collection procedure. Collection agencies have also worked in this field on behalf of their clients since 2008. At the beginning of these proceedings, a default summons is obtained from courts of law. This is followed by an enforcement order. When the collection procedure is taken up again after the court proceedings, the service provider then ensures that the bailiff enforces the collected total. Under certain circumstances, wages can be attached. The debtor is at a disadvantage if collection procedures have to be continued until foreclosure. The further the collection procedure escalates, the more expensive it will become for the debtor. So, the debtor should aim to conclude the collection procedure as early as possible.