CAT / FIA FFM Syllabus F. Credit Management - Debt collection and court - Notes ^{4 / 7}

Debt collection agencies and going to court

Debt collection agencies collect debts for a commission.

If it comes to court, a county court may issue a default summons. 

The judgement may be enforced in a variety of ways, including bailiffs or insolvency proceedings.

Debt collection agencies

Debt collection agencies (called 'credit collection agencies') are the most effective way of pursuing debts. 

Some debt collection agencies offer a variety of credit control services, including running the credit control department in its entirety. 
 
Unlike other sources of third party assistance, most debt collection agencies are happy to be paid by results. 

In other words, most debt collectors offer a 'no collection, no fee' basis.

Collection agency's techniques:

1. Some collect on a letter and telephone basis. 

   This is often the case where the client has passed on a large number of consumer debts.

2. Others, especially for more difficult cases, collect 'on the doorstep'.

Going to court

Before going to the expense and hassle of going to court, a firm must be sure of its case, and should therefore do the following:

• Be sure that the customer genuinely owes the company money rather than just being a dissatisfied customer

• Check who the customer is (individual, firm, limited company).

• Ensure the name is correct.

• Before suing, it is advisable to check the original credit information. 

  Is the customer likely to have sufficient assets?

Which court?

The Small Claims Court generally deals with amounts under £5,000 in the UK. 

The parties can refer the case to an arbitrator, whose award is recorded as a county court judgement.

In the UK County Courts deal with all actions in contract below £25,000, and some between £25,000 and £50,000. 

The High Court deals with amounts over £50,000 and some cases where the amounts disputed lie between £25,000 and £50,000.

Once the court has received the necessary paperwork

it will issue a default summons, normally by post, but for a fee the Court bailiff will deliver it personally.

• If the customer does nothing (ie does not reply to the summons) judgement goes against him.

• The customer can admit the claim: in other words they accept the amounts owing.

• If the customer admits the claim, they may offer to pay by instalments. 

  The supplier can accept this, or, if not, has the right for the court to fix a suitable means of payment.

On the day fixed for the trial

the supplier will be required to bring evidence to prove the claim and to defend against any counterclaim the customer might bring.
 
A summary judgement is when the supplier draws up an affidavit (a statement of the facts of the case). 

If the defendant does not appear, the judgement may well go against him.