Personal Debt Collection

Some of the most common challenges faced by debtors during personal debt collection include:

1. Lack of current contact information – Debt collectors often struggle to reach debtors due to outdated or inaccurate contact details like phone numbers and addresses. Debtors may move frequently or provide incorrect information initially.
2. Difficulty identifying and contacting debtors – Even with some contact information available, debt collectors can have trouble definitively identifying and getting in touch with the right person. The debtor may be hard to reach or unresponsive to collection attempts.
3. Financial hardship and inability to pay – Many debtors face genuine financial difficulties that make it challenging for them to repay debts. Economic conditions, job loss, medical issues and other factors can severely impact a debtor’s ability to make payments.
4. Lack of engagement and cooperation – Debtors may avoid communicating with debt collectors or refuse to cooperate in setting up payment plans. Building trust and opening lines of communication can be difficult for collectors.
5. Disputes and complaints – Debtors may dispute the validity of the debt or file complaints about collection practices. Resolving these issues takes time and resources for collection agencies.
6. Regulatory compliance – Debt collectors must carefully navigate regulations like the FDCPA which govern their interactions with debtors. Compliance requires training and oversight to avoid legal issues while still recovering debts effectively.
7. Emotional distress and mental health impacts – The stress and pressure of being in debt and dealing with collectors can take a major toll on debtors’ mental well-being, making it even harder for them to confront the situation and work out solutions.

In summary, a combination of logistical challenges in contacting debtors, financial limitations of those in debt, fraught collector-debtor relationships, and the mental burden of indebtedness pose significant obstacles in the personal debt collection process for many debtors. Overcoming these challenges requires collectors to locate debtors, open productive dialogues, provide manageable repayment options, and comply with relevant regulations.

1. Identify vulnerable customers early on by:
   • Leveraging internal data sources to look for vulnerability triggers like missed payments or data on benefits the customer receives
   • Monitoring specific metrics for vulnerable customers like repayment plan breakage rates, engagement rates, use of forbearance measures, and complaints data1
   • Picking up on verbal cues and language indicating financial hardship, job loss, eviction, or anxiety about managing debts
   • Using collections software with AI to detect signs of vulnerability in customer communications
   • Analyzing payment patterns and profiles to identify at-risk customers
2. Train staff thoroughly on identifying and sensitively communicating with vulnerable customers, handling disclosures appropriately, understanding their situations, and offering the right support. Provide staff support to cope with the emotional toll.
3. Engage early, empathetically and sensitively to understand the customer’s individual circumstances before pursuing collections activity. Avoid actions that could worsen their situation.
4. Offer appropriate forbearance and flexibility, such as reasonable repayment plans, payment breaks, or putting the account on hold temporarily if needed based on the customer’s circumstances.
5. Partner with debt advice charities and agencies to increase awareness of available support services and ensure smooth referrals for customers needing extra assistance.
6. Maintain clear, well-documented policies and processes for treating vulnerable customers fairly and ensure compliance with relevant regulations.
7. Only use debt collection agencies that have strong policies themselves for dealing with vulnerable customers.
8. Empower vulnerable customers by proactively signposting available financial support services and encouraging them to engage with their finances, e.g. by checking their credit report.

1. The debt will likely increase due to additional interest, fees and penalties being added over time. Ignoring the debt does not make it go away, and the amount owed will continue to grow.
2. The debt collector may escalate their collection efforts, such as contacting you more frequently via phone, email, SMS or in person. They are allowed to contact your relatives or associates to try to reach you.
3. If you continue to ignore them, the debt collector may commence legal proceedings against you in court to recover the debt, their costs, and interest. They would file a Statement of Claim that you must respond to within 28 days.
4. If you don’t pay the amount claimed or file a defence, the court may enter a default judgment against you. This is a court order stating the debt is due and payable.
5. A court judgment against you will be recorded on your credit report as a default by credit reporting agencies. This can negatively impact your credit score and ability to obtain loans or credit in the future until the default is removed.
6. If the debt collector obtains a court judgment, they can take further legal actions to recover the debt, such as:
   • Requesting the court to issue a writ allowing the sheriff to seize and sell your assets
   • Obtaining a garnishee order requiring your bank, employer or tenants to pay funds to your creditor directly
   • Commencing proceedings to bankrupt you or wind up your company, resulting in the seizure and sale of assets to pay creditors