In the meantime, more and more companies are moving away from collecting outstanding invoices themselves and handing them over to a collection agency. Read here why this is so and how you can best react when you receive a collection letter.
What is a debt collection agency?
In many cases, large mail order companies or online shops, but also medium-sized companies hand over unpaid invoices to a debt collection company. There are essentially two reasons for this:
- Having the reminder issued by the debt collection agency or a debt collection company relieves the burden on your own employees enormously. The customer accounting department only has to deal with the “normal” incoming payments and hands over the outstanding amounts to an external specialist after a fixed payment delay. In this way, motivation is also maintained, because all the negative energy and excuses of debtors bounce off specially trained telephone employees of the debt collection companies. Instead of putting an emotional strain on the company’s accounting department.
- Joint action reduces bad debt losses: If all those customers who are unwilling or unable to pay are collected by debt collection companies, then this company can warn the affiliated contract partners in good time. And, for example, recommend that certain customers be supplied only against advance payment and secure payment methods.
This description of the procedure leads us directly to what debt collection companies actually are: They are private companies that specialize in the collection of outstanding, legitimate debts. In spite of their expertise and in spite of all their know-how, they have no “more rights” than a normal creditor. Unlike customs or bailiffs, they are not allowed to enter flats against the debtor’s will, nor are they allowed to independently collect goods from debtors’ properties. The highly trotting names, reminiscent of state organisations or even Latin names are supposed to create an emotional gap when you receive a collection letter.
What to do when you receive a collection letter?
As soon as you have received a collection letter, you should thoroughly check whether this letter is actually based on an existing claim. Or ask yourself in plain language: Have you really ordered and received what you ordered? Or is it a surprise attempt after a phone call – where you did not buy anything at all. In these cases, check whether the statutory right of withdrawal or the voluntarily granted return option has already expired.
Then you should check whether the amounts invoiced correspond to reality at all. According to a television report, even Deutsche Bahn did not check its debt collection company. In addition to the normal collection prices, the latter charged additional fees for a standard letter from the neighbouring law firm. This is called “double harvest”. Please transfer the actual amount as soon as possible and within the mentioned period of time and an amount that seems appropriate for the collection.
Important: Indicate as the reason for payment that the “main claim” is to be served immediately. The decision to ignore a collection letter is not a good idea here. You should therefore pay within the specified period! If you are in doubt as to whether the claim is justified, the consumer advice centre could be the right contact.
Do you receive a Experian entry directly after the collection letter?
You would most likely only receive a Experian entry in the following cases: First of all, you would have to have explicitly agreed to the transfer of data to Experian or a credit agency in the original contract (e.g. the online shop or mail order company). The open amount only becomes negative information or a negative characteristic if the amount is irrecoverable. The collection agency does not know at the moment whether you want to ignore the collection letter or pay it.
How can you tell if it is a real collection agency and not a fraud?
If you have received a collection letter or a reminder from the collection agency is in your mailbox, then you should proceed exactly the same as with any other business letter! Take your time after you have received the collection letter and check the information at your leisure.
If all the necessary details such as
- Return address,
- Commercial register entry,
- telephone availability included and correct?
If you receive a collection letter containing a 0900 phone number or a foreign number, you should be even more careful. Then you should also – as already described – check whether it is a contract that you have actually concluded.
Many consumers who have received a collection letter have been taken in by telephone calls and have subscribed to prize draws or magazines that they did not know they had. Therefore, you should check immediately whether you have received a confirmation of the contract and have been informed of the right of withdrawal. Another indication of fraud is a name of the account holder that differs considerably from the company name. If you have received a collection letter from a large debt collection agency, then the account holder will never be a private person.
You should also make sure that the first two letters of the international bank account number begin with “GB”. But would your landlord or other company have an account in Cyprus, Bulgaria or Estonia? Very unlikely.
Here is the rule: listen to your instincts or gut feeling when you receive a letter of collection!
Receiving a collection letter is no end of the world – how you should proceed now
As soon as you receive a collection letter, you should work through the steps and thoughts mentioned above in a kind of checklist. Then you will determine whether the claim is justified. If an unpaid, justified invoice is indeed the reason why you have received the collection letter, then settle the main claim as soon as possible or contact the collection agency. If you are not able to assign the debt collection claim to your person, then object to the claim by registered letter of advice of receipt and say that the debt collection agency must substantiate or substantiate the claim. Under no circumstances should you simply ignore the collection letter. This can have fatal consequences.