The good news is that putting the collection of your debt in the safe hands of a professional debt collection agency is not only an effective solution, it is also affordable. Using this method, you’re more likely to get the majority of your money back, rather than simply having to write the debt off.
How to get the best value from a debt collection agency
It makes sense to choose a debt collection agency that works on a commission-only basis, with a 'no collection, no commission’ guarantee. That way, you won't be landed with any up-front charges, and you won't need to worry about escalating costs. It also ensures the agency works quickly and efficiently, because it's as much in their interest as it is yours to see the debt settled as promptly as possible.
The other main attraction of this arrangement is flexibility. There's no need to commit to a long-term contract (unless you want to). And when it comes to taking things to the next level, you're in control. A good debt collection agency will offer a range of add-on services, such as expert advice and guidance on taking legal action or instigating insolvency proceedings.
So, if a debtor is proving particularly stubborn and even the debt collection agency is drawing a blank, you have two choices. You can simply cut your losses; in which case you've only lost the value of the debt. Alternatively, you can weigh up your options, assess the cost and time implications of taking further action, with no obligation to commit unless you think it makes sense to do so.
Referring the debt as soon as possible can also help limit your exposure. Debt collection agencies are generally much more successful in collecting debts which are less than six months old. In addition, earlier referral decreases the likelihood that you'll incur legal costs in chasing the debt.
How you can recover some of your costs
Providing the debtor is a business, you're legally entitled to recover reasonable debt collection costs by adding them to the value of the outstanding debt. The amount you can charge ranges from £40 for a debt of up to £999.99 to £100 for a debt of over £10,000.
You are entitled to charge an amount over and above one of these fixed sums if you can prove that it doesn't cover the reasonable costs of recovering the debt.
You can also charge the debtor interest on the outstanding debt. The interest rate you can levy is fixed at 8% above the Bank of England base rate.
The other way it’s possible to recover your costs is if you have a recoverable clause in your terms and conditions. If you are unsure whether you have this, a reputable agency will be able to advise you and offer a service to update this for you so that you are protected in the future.
