10 Debt Collection Myths Exposed!

Too many companies are simply writing off debts owed to them, without ever considering using a debt collection agency. There are a lot of myths surrounding debt collection companies, which can sometimes hinder people from using them.

Consider the below first before you write off debts owed to you in future.

FOR THE CREDITOR

It’s expensive:

Using a debt collection agency does not have to be expensive with the right company. Make sure you use a “no win, no fee” debt recovery company. Make sure there are no up-front fees or admin charges to pay.

Sometimes debt collection can even be free.

Under the Late Payments Interest Act, you can add a Late Payment fee to the debt owed. This could cover your costs, (depending on the amount owed) of the debt collection agency fee.

The price you may pay for the services of a debt collection agency will be a lot less than if you were to write the debt off completely.

I will lose my customer or it will upset them

A good debt collection agency will focus on the importance of your customer retention. They will understand how hard you have worked to obtain your customer. The last thing a good debt collector will want to do, is to rile your customer. A payment is more likely to be obtained if the process remains respectful and professional throughout.

Sometimes bringing in a friendly but professional third party enables disputes to be settled much more effectively.

Debt collection companies are only for large companies or large debts.

There are many type of debt collection companies. Some of them specialise in certain areas and for debts over a certain amount of money. Others will accept lower amounts. Don’t dismiss it until you have looked at all of the options available. Franklin James Credit Management will recover debts from even under £450. We believe in the principle of being paid what you are owed for a good service or product that you have provided.

A solicitor is more effective

There is of course a time and a place for using a solicitor. However, to collect a payment right at the start of a debt collection process, a solicitor may not be the most cost-effective way to go about it. This is even more so if the amount owed is under £10,000 as it is rare for costs to be awarded in a “small claim” case.

A good debt collection agency will often work on a no win no fee basis. They should even be able to support you throughout a legal process if needs be. Often a debt collection company will affiliate with a commercial litigation specialist if their service is required.

It will damage my company and reputation

The idea is to find a good debt collection agency that has a good reputation and who will respect your company ethos and brand. Check their reviews and speak to the people within the company, before you assign any debts for them to collect. Perhaps even use a collection agency that has been recommended by a friend or business acquaintance.

FOR THE DEBTORS

Debt will go away if I ignore it for long enough.

If ignoring a debt was the best way to make it disappear, then I don’t think anyone would pay their bills. Calls, emails and letters may stop from debt collectors after a few weeks of ignoring, but it does not mean that the “debt has gone away.”

It will continue to be listed on your credit report and you will still owe the money until you decide to pay up.

If I don’t make a payment within six years, then the debt will be written off.

This refers to the 1980 Limitations Act. This act suggests that a debt will become statue barred if the customer has not admitted claim or made a payment. Whilst this act can protect a debtor from being forced to make a payment, the debt will not be simply “erased.” The debt will still be owed, but the company would no longer be able to chase you for the outstanding payment through the legal court system.

Asking a debt collector to stop contacting you “Cease & Desist letter”

A “Cease and Desist letter” is a letter that you would send to a debt collector asking them to cease all communication with you. Under the Fair Debt Collection Practices Act, it requires the debt collector do stop contacting you or face civil penalties.

The debt collector may send you one final letter to state that all future communications will be terminated, but this does not stop you from being taken to court to obtain the debt through the legal system.

Paying a debt will remove it from your credit report and improve your credit score

Having a debt collection showing on your credit report will hurt your score! Making a payment wont necessarily improve your credit score right away either. Over time, your credit score can improve after making the payment owed. This is only if you continue to pay all of your other bills and accounts on time and handle your debt effectively.

Making a partial payment will stop the debt collector from repeatedly contacting you

Making part of the payment may give you some relief, but a good debt collection agency should inform you of when the next payment is due by. Communications from the debt collector will start up again should you miss the next payment date. If you stick to the payment arrangement agreed, repeated communications from the debt collector wont be required.