“Best to collect debts locally”

When you have a good glass of wine on a long, sultry summer’s evening, the culture of ‘mañana mañana’ and ‘la dolce vita’ becomes very attractive. But if you’re confronted with defaulters from these Southern European countries back in the Netherlands, it could soon become upsetting. Dick Wolff of DWM has his desk covered by files from defaulters. He is specialised in collecting outstanding invoices abroad, and he is positive: a debt across the border can be properly collected.

“Many debt-collecting agencies in the Netherlands are specialised in national collecting,” Dick says. “They are familiar with the legislation and language. It’s their everyday job, but it becomes more difficult if your debtor is in Russia, Romania or Africa.” Dick knows from experience that letters sent by a creditor or debt-collecting agency in the Netherlands to a debtor abroad ends up at the bottom of the pile. A local debt-collecting agency can put more pressure on the debtor. 

“Of course you could look for a debt-collecting agency using Google, but you won’t know what sort of office that is,” Dick explains. In the past twenty years, he built a global network of debt-collecting agencies, although he also met some ‘black sheep’ in the process. He talks about a collecting agency in one of the Balkan countries that asked customers for a down payment. “The files were left untouched, but the company earned money,” Dick says. He also knows stories of debt-collecting agencies that work on the file, collect the money, but then don’t transfer that money to the customer. “Via Google you could find a company with a nice-looking website, but that’s not a guarantee for success. There are plenty of cowboys out there.”

The procedures followed by foreign collecting agencies can also vary greatly. “There’s always a risk, after all, who are you giving the file to? How is the debt collected? Will he visit the debtor’s private address with a large dog at night?” In Easter European countries, among other places, these kinds of methods to force defaulters to pay are not unknown. “I have built a network, and in the past years I have experienced all of these situations. I’ve also had partners who suddenly disappeared or went out of business.” Dick invests about 20 to 30 per cent of his time in improving and renewing the service. That time is spent, among other things, expanding the network, but also gaining knowledge about the procedures in other countries.

In the Netherlands, the process is fairly simple. The debt-collecting agency has various ways of contacting the debtor, and increases pressure to pay. An extrajudicial solution can be found, a monthly payment instalment, for instance. If that is a dead end, a judicial procedure can be started, and the case is put to a judge. For that it’s important to weigh up the size of the debt and the costs for the court procedure. “The procedure is the same in all countries, but legislation differs.” 

A local debt-collecting agency has two major advantages: the language barrier and the distance are improved. “A debtor looks at two things. Which bills are most urgent, and which creditor can be the most unpleasant.” A Dutch company that sends e-mails and calls every now and again is not an urgent creditor in that respect. “With a local office, more pressure can be applied, because the collecting agency also knows the legislation and can cause problems for the solvency of the company.” In the Netherlands, there are databases that collect information about companies. That data is also consulted by, for example, banks or insurances. If a company has a negative mention too often, financing or insurances can be withheld. 

According to Dick, his company proves hiring a local debt-collecting agency has a good chance of being successful. “Dutch collecting agencies often say that there’s a small chance of success internationally. We have seven employees who all live from this work. Collecting locally is the best way.” An important factor for success is time. “You have to ensure you’re in the top five bills of the debtor’s stack.” The longer it takes before a professional debt-collecting agency starts working on the debtor, the lower the bill will be in the stack.

Another success factor is a country’s structure. For example, data protection plays a role in that. Dick exemplifies: Scandinavian countries have many public databases, from which much data can be obtained. Companies don’t want to negatively end up in those databases, so there’s a fairly good chance of success.

In other countries, the judicial procedure is slow or expensive, so that this means of pressure is missing. A debtor who knows it will require a considerable investment to bring the case to court, will make less haste to pay. “Another thing that plays a part: what can a debt-collecting agency earn? Which costs can you ask of a debtor? That varies in many countries,” Dick knows. In some countries, collection fees and interest cannot be passed on to the debtor. Because of that, collecting agencies are dependent of just the commission. “How much time is a collecting agency then prepared to invest in the file?”

Nothing sensible can be said about the chances of success in advance, Dick says. “I don’t know the debtor, nor the file. It’s not serious if a debt-collecting agency says there’s a high chance of success without all that information. He’s just trying to get the file then.” A debtor who is terminally ill and no longer works, a company that went bankrupt, these are just two examples that decide whether a debtor can pay or not.

For that matter, Dick can also see that most debtors want to pay, but are unable to. That’s why it’s important to stick to the extrajudicial procedure as long as possible, and to think with the debtor by proposing, for example, payment in instalments. But it’s also not good to have too kind a disposition. “When you’re too kind, you end up at the bottom of the stack and it will take longer before you’re paid,” Dick says. The balance needed is fragile. “When you have a good customer with whom you have a long-term relationship, you should look for a solution together, and not send a lawyer or bailiff at the debtor right away.”

“It’s important to keep in contact with the debtor, and that starts long before the collection,” Dick explains. That is part of the debtor management. Dick recommends keeping tabs on which customers always pay on time, and especially to keep an eye on deviations. “I often hear that new customers have to pay in advance, as well. That sounds nice, but how long will a customer remain new?” Dick wonders out loud. There are examples of companies that place small orders twice and pay immediately. When they place their third order on credit, it’s a larger order, and payment isn’t forthcoming. Dick concludes with some advice: “I always advise people to set up a story research. That costs between 50 and 100 euro, but you then know that party’s story. Companies lose the most money on permanent customers. That’s about 70 per cent of the cases.”

Economic, social and political developments influence the work of debt-collecting agencies. During the years of crisis, the number of files offered to the agencies rose, but it was not a ‘Golden Age’ for them. “Many people think that collecting agencies profit in bad times, but we make a living when debtors pay,” Dick says. People who are fired or companies that disappear from the market make it more difficult. “You might get new files, but if you can’t collect the payments, it’s no use. We have now noticed it’s getting a bit better, sales are rising and companies start paying off old debts. Even if only in monthly portions, it’s better than nothing.”

The Russian boycott, which deeply affected the various boycotted sectors in 2014, was indirectly noticed by debt-collecting agencies as well. “I’ve dealt with debtors who had problems because of the boycott of Russia,” Dick explains. “For example, I have a major claim of 800,000 euro on a German company that was dependent on the export to Russia. The company would pay 50,000 euro per month, but had no sales at all anymore. Their whole market collapsed, so now he only pays 1,000 euro per month.”

Social problems, such as Ebola in West Africa in 2014 and 2015, also make the job more difficult. A number of files in the affected countries were left untouched in that period, because the lawyers Dick works with fled the country. Wars or rebellions also affect the job. “A lawyer in Nigeria was to visit a village that is now under Boko Haram’s control, and he therefore responded: ‘We are not doing anything now.’” The annexation of Crimea and the conflict in eastern Ukraine are also factors that make it more difficult. The work is impossible in countries such as Syria, Iraq or Iran.

DWM

Dick Wolff