Role of a Debt Collection Agency in Commercial Debt Recovery
Debt collection or debt recovery is the process of collection of debts owed by individuals or businesses in Dubai, Sharjah, Abu Dhabi or United Arab Emirates. In today’s fluctuating economic scenario, thousands of cases are reported where debts are not repaid and it becomes a headache to extract them. Commercial debt recovery is a huge market, where small as well are large scale businesses are unable to pay back the capital they borrowed or the services they used.
The Role of a Debt Collection Agency
Debt recovery is a major issue across the world. Time and again, new methods have been applied to solve this problem. From forced slavery to mortgaging property, every method has been applied, but there were cases where the debtors fled or they didn’t have any property that could be mortgaged.
It became more and more difficult to collect debt with cases of fraud, identity theft and delinquency becoming common. There was a need for professional agencies with well qualified attorneys and people with area specific jurisdiction.
Debt recovery agencies were created to fulfill these demands. These agencies pursue debts on behalf of their clients by employing experts to extract debt. These agencies try to recover the debt without much involvement of legal action and court orders, but if required the attorneys can take legal help to recover the debt.
In such cases, agencies represent their clients in civil courts against the debtors. They recover the debt in a manner that is conducive to the client as well as the debtors, making debt recovery hassle free.
Types of Debt Recovery Agencies
In any debt contract there are two parties involved, first party (lender) and second party (debtor). Collection agencies are categorized into first and third party agencies according to the same terminology.
- First Party Agency: It is a department or the subsidiary of the lending company. It gets involved in the debt collection process early. It is free of legislation that governs the third party agencies because it is a subset of the original lending company. It tries to recover the debt for a few months and if and when they are unsuccessful, then the job is passed on to the third party agency.
- Third Party Agency: It is called as such because it is not a part of the original debt contract. It is neither a part of the first party agency. The third party agency collects the debt at a fee which is usually some percentage of the debt recovered. The percentage charged depends on the stage of the debt; the more advanced the stage, the higher the commission. Most of the times the full debt is not recovered, but the agency is only paid when some amount of the debt is collected. This is called the “No Collection-No Fee” Typically anywhere between 25 to 45% of the debt recovered is used as the fee.
How do Debt Collection in Dubai or Debt collectors work?
DISCLAIMER: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific or legal advice on the information provided and related topics, please contact us.
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