Dos and Don’ts of Debt Recovery for Creditors
Updated: Jun 1
When you are owed money, it is natural to feel a range of emotions – anger, frustration, and disappointment among them. However, it can be costly to let such emotions guide our actions when attempting to recover a debt.
Even though you may be morally justified, it is still important to take a professional approach towards debt collection. Doing so will increase your chances of being paid.
Here are a few potential missteps to avoid in the early stages of debt recovery:
Do not threaten legal action or misrepresent the consequences of non-payment. If you threaten legal action which you cannot or do not actually take, this may be considered as deceptive conduct or harassment – and actually reduce the chances of getting money back. The threat of legal action can be effective in recovering debts outside of the court but should be approached with a letter of demand from an experienced lawyer.
Do not disclose the personal details of the debtor in a way that compromises their privacy. For example, it may compromise your standing under privacy law to accidentally contact the wrong person in a business, or to discuss the issue with a colleague of the debtor. Again, legal counsel is your surest bet for a compliant approach.
Do not contact a debtor for unreasonable purposes outside of reasonable hours and at an excessive frequency. The conversation should be contained to only what is necessary, which may or may not include providing information on the debtor’s account or demanding payment.
Conversely, here are a few actions that you should take or consider taking when attempting to recover debt:
Keep an accurate and thorough record of your communications with the debtor. This record may include timing of contact, type of contact, and records of correspondence. This will provide evidence if the case makes it to court.
Do heed the advice and guidelines of the ACCC and ASIC, which in their capacity as protectors of the consumer and Consumer Law, govern debt collection. This can help to avoid a case being made against you – quite the opposite of what you are likely to be picturing when pursuing money that you are owed.
Vow to take a cautious approach from here on out, ensuring that you are covered under contract law. While it may be too late by the time you are owed money, it can be a helpful wake up call to ensure that you have foolproofed your approach to business and are less likely to be caught out again.
Consider engaging legal services for debt recovery. Often, a lawyer’s letterhead and their letter of demand may be enough to encourage the debtor to pay their debts and return the money that you are owed.
They will be able to represent you through multiple stages of escalation – first the initial contact and then, if necessary, the courts. Because a lawyer deals with cases like your own on a regular basis, they will know what works and what doesn’t, and be across relevant law and processes.
This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.
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