Debt Recovery Agencies - Any Experiences using their services

[The Big W]

New to the forum, but hoping I can get some 1st hand advice.
As a victim of various bad debts in the past 18 months, I'm intrigued as to whether anyone out there has any experiences, good or bad, concerning the use of Debt Recovery organisations.
In our particular situation we'd be looking to try and recover funds from companies who have gone into liquidation as opposed to just late payers.
Advice so far has been to avoid, but there seems to be so many of these particular organisations out there, they must have some success.
All comments welcome.

 

[Clarkmans]

If a company has gone into liquidation then you just have to submit your claim to the liquidator. Chances are you will not make a recovery or if you do it will be a small percentage of the debt. You cannot pursue these debts.

If you are experiencing a lot of problems with companies going bust then you should consider whether you could get money in advance or get a personal guarantee from the directors.

Clare

 

[Michael Gerard]

I second Clarkmans comments. And since my work enters the area of insolvency, it is rarely worth your time even making a claim to the adminsitrators / liquidators.

However, in the real world, you will very rarely obtain either a PG or monies in advance. That said, it will of course depend on what you are selling as if it is a specialist item or service, then perhaps you may carry some weight.

IMO, the best bet is to look at minimising your exposure to an insolvency and obtain regular interim payments and perhaps draconian terms for failure to pay, like immediate suspension of performance.

 

[Michael Gerard]

PS - there are some good debt collectors using this form, like Geoff T, who no doubt will post.

 

If a company has gone into liquidation then you just have to submit your claim to the liquidator. Chances are you will not make a recovery or if you do it will be a small percentage of the debt. You cannot pursue these debts.

If you are experiencing a lot of problems with companies going bust then you should consider whether you could get money in advance or get a personal guarantee from the directors.

Clare

Couldn't agree more. Like Clare said, you seriously need to look at how to avoid this. Personal Guarantees are a great way as you would have recourse if the company goes down. Other things to consider should be credit checking the businesses prior to offering credit - although this gives no guarantee there can be clear warning signs of future problems *if* you know what to look to. You could also outsource your credit control and like recommended already Geoff T or GRDcredit are the men to speak to

 

[Geoff T]

PS - there are some good debt collectors using this form, like Geoff T, who no doubt will post.

Couldn't agree more. Like Clare said, you seriously need to look at how to avoid this. Personal Guarantees are a great way as you would have recourse if the company goes down. Other things to consider should be credit checking the businesses prior to offering credit - although this gives no guarantee there can be clear warning signs of future problems *if* you know what to look to. You could also outsource your credit control and like recommended already Geoff T or GRDcredit are the men to speak to

Thanks Charlie + Lucy for the kind words... Charlie - think "credit control" mate

OP - as expected, I'll have to agree with Clare, Charlie and Lucy (who all know their stuff!), chasing insolvent companies for payment brings "gate and horse" to mind.

I'd suggest the same as Lucy - credit checking new and existing customers. By doing this you'll not only be able to set proper credit limits before giving credit, but the online monitoring available means you can keep an eye on existing customers...

The other thing to think about is "word on the street"... you sometimes find the rumour-mill goes into overdrive about a company if they're in trouble... which can give invaluable advance warning of a problem... I don't know your particular set up, but how does info from your sales flow to whoever does credit control now?

Out of curiosity, can I ask what industry you are in?

 

[The Big W]

Thanks for the replies so far.

Geoff we're a small specialist labour supplier. As standard we always carry out credit checks. Last year we were using Royal Bank of Scotland for factoring, unfortunately when the brown stuff hit the fan with the recession, RBS began withdrawing credit protection & limits for the smallest excuse.
Anyway RBS probably deserve a thread of their own, if they've not already had one.
As we're already past the stage of administrators involvement (and the expected £0.00 dividend was realised) my specific enquiry is more to do with Debt Recovery Agencies. 3 of the companies, who went into liquidation owing us, have Directors who are involved in either 'sister' companies or Phoenix organisations and are trading and making money whilst we suffer. We have been approached by a couple of debt receovery organisations, who after some research into these directors/companies, are extremely confident they can recover funds owed to us.
My understanding is that there is no director's liability for debt once a company goes into liquidation. I'm being told this is not the case by the Debt Recovery people.

 

[Geoff T]

My understanding is that there is no director's liability for debt once a company goes into liquidation. I'm being told this is not the case by the Debt Recovery people.

I think they're wrong, and wouldn't advise it unless they were offering no win no fee...

If it won't cost you anything to let them try then you've literally got nothing to lose, but if they want a fee up front - that's different...

 

[Clarkmans]

They're are a few circumstances when a director can be personally liable but it is not easy to prove.

If they're not charging you a fee but only take a percentage of what is recovered then you might as well give it a try.

Clare

 

[Michael Gerard]

I think they're wrong, and wouldn't advise it unless they were offering no win no fee...

If it won't cost you anything to let them try then you've literally got nothing to lose, but if they want a fee up front - that's different...

Yes Geoff, they are wrong but, there are exceptions like for example, directors who continue to trade knowing that the company is insolvent or, where a director of a company that has gone into liquidation etc and sets himself up again through a phoenix company. But this is a complex area of law regarding fraud and one for a lawyer that specialise in such matters, not debt collectors.

I would be very sceptical of anyone offering such a service.

Perhaps Clarkmans wishes to add a bit more.

 

Obviously none of us have the full details but like Clare, Charlie & Geoff have said the liklihood of seeing any money back is doubtful. As Charlie pointed out it wouldn't be your standard no-win no-fee debt collectors that would take on cases such as this and there would be legal costs to pay.

It would be interesting to know whether you have just been fed some sales patter by a sales person with little knowledge of the industry?

 

[Michael Gerard]

It would be interesting to know whether you have just been fed some sales patter by a sales person with little knowledge of the industry?

I'll second that!

 

[The Big W]

We were originally approached by one of their 'Salesmen', but since interest was established in their services, I've been conversing with one of their 'Consultant's' who reckons he has over 15 years experience in the industry.
His confidence in the recovery procedure based on the details of the debtors I've forwarded to him, is very tempting to take up. However, I'm not in a position to throw more money at bad debt.
It's very galling to see other individuals conveniently using 'the system' to wipe out legitimate debt and carry on regardless, whilst leaving others to face the consequences.

 

His confidence in the recovery procedure based on the details of the debtors I've forwarded to him, is very tempting to take up. However, I'm not in a position to throw more money at bad debt.

So he is not offering you "no win no fee"? Would you care to name them?

 

[Clarkmans]

Yes Geoff, they are wrong but, there are exceptions like for example, directors who continue to trade knowing that the company is insolvent or, where a director of a company that has gone into liquidation etc and sets himself up again through a phoenix company. But this is a complex area of law regarding fraud and one for a lawyer that specialise in such matters, not debt collectors.

I would be very sceptical of anyone offering such a service.

Perhaps Clarkmans wishes to add a bit more.

It's not an area of law I do so was not really wanting to add anymore!!

A director could be found to be personally liable for fraudulent or wrongful trading. In rare cases where all the assets are transferred from one company to another to avoid debts then they could be personally liable.

It is not something a debt collector could do for you. I presume that they try to scare the director into paying or it is just a con and they're trying to get money out of you. If its a no win no fee service then you've got nothing to lose but I would be very surprised if they made a recovery as cannot imagine a director would just pay up.


I agree with the advice above and think you should improve your credit control.


Clare

 

[The Big W]

Lucy, Link below for the Company I've been conversing with. However, a quick google search throws up 100's/1000's of this type of organisation

Commercial & Domestic Investigations - can't post a link I've just been informed I need a minimum 15 posts before I can post a link:|...best I can do is:

commercialdomesticinvestigations.co.uk

 

[Clarkmans]

Just seen your post that you have to pay.

If they're that confident of a recovery then why is it not no recovery no fee? All they'll do is send a letter out.

 

[Clarkmans]

They seem to do credit control and debt collection. There are lots of organisations that do this.

The problem with your creditors is that they are insolvent. You cannot pursue the insolvent companies or individuals. You can use this company to pursue the other debts however most debt collection agencies do no recovery no fee, don't they?

Clare

 

I've never come across this company before but like you say there are thousands!

 

However most debt collection agencies do no recovery no fee, don't they?

Clare

Mmmmm difficult one Clare, I mean when collecting debts in for our existing clients we don't charge if it is just a matter of sending a couple of "stern" letters, but if that fails we tend to use tactics such as winding-up petitions, charging orders etc for which we do obviously charge.

But we're not a Debt Collection agency and it is not the main part of our business.

 

They also look like they could be linked to a company called CDI credit Management...a quick google search brings up un happy customers on another business forum

 

[The Big W]

Lucy,

very useful info. They operate out of the same business address. Thought it was strange that C&D investigations had been dormant on Co. House up until recently.

 

[Geoff T]

The other thing that would concern me is the use of the term "automated debt collection"

 

[GEKKO27]

We used one such debt collector who managed to do in a week what we failed to do in the previous 5 months. On that particular job I recommended a couple of shopfitters which he also never got round to paying; Got all 3 debts collected at the same time. I think they operate in a 50 mile radius of York but if you're outside that and want to give them a go I'll be happy to give you the number.

I know exactly what you mean with the pheonix companies so it'll be my pleasure

Tony

 

[The Big W]

Hi Tony,

that's very interesting. Were these debts recovered from a company/organisation that had already gone into liquidation/receivership or were this company still trading?

 

[GEKKO27]

Bit of both,

The job was fit out of a food outlet for a well known restaurant chain, so the end user of the goods is still in business. The project was subcontracted to a Project manager ( I use that term very loosely), who did the pheonix trick.

After having no luck with the Proj Mgr we aproached the restaurant chain themselves who told us the proj mgr had control over funds allocated by them for the build and thought that he had paid all the other contractors; but they could no longer get hold of him.

A motor trader client of mine put me in touch with collector man, the only contact details i could provide him with were some I found on linkedin, gave him the invoice and off he went. A week later he'd tracked the guy through 4 folded business and a longer string of home addresses. Got paid straight away and paid 10% out of it. Like I said I asked him to collect for 2 others while he was there which he did.

I take the point others made about insolvent companies having no money, but that wasn't the case for us and it sounds not for you. They just had no intention of paying you in the first place and make their living by exploiting honest people, using loopholes and professionals to stay legal while continuing to operate in an unlawful manner.

 

[The Big W]

Tony,

have you got any contact details for the collectors you used? May well be worth a chat with them.

 

[GEKKO27]

On PM for you

 

[Tabbie]

I used a company about 18 months ago when I had a small amount of debt. The guy came out, looked at everything and told me to declare myself bankrupt!!!! Resulting in loosing my house etc over £9k. I have never heard anything so ridiculous - I wont mention the company name obviously but they didnt seem to have a clue.

They put together letters on my behalf and sent them to the companies i told them NOT to instead of the companies I wanted them to, they got the figures on agreements etc completely wrong, ignored calls and basically couldn't have cocked it up anymore.

After being told there was just no way to carry on etc and that the best thing to do was declare bankruptcy, my company is still trading etc. I would pick a company wisely!

 

[Geoff T]

I used a company about 18 months ago when I had a small amount of debt. The guy came out, looked at everything and told me to declare myself bankrupt!!!! Resulting in loosing my house etc over £9k. I have never heard anything so ridiculous - I wont mention the company name obviously but they didnt seem to have a clue.

They put together letters on my behalf and sent them to the companies i told them NOT to instead of the companies I wanted them to, they got the figures on agreements etc completely wrong, ignored calls and basically couldn't have cocked it up anymore.

After being told there was just no way to carry on etc and that the best thing to do was declare bankruptcy, my company is still trading etc. I would pick a company wisely!

Glad you're still going Tabbie

 

[OptiRick]

I would pick a company wisely!

Indeed.

A few years ago I paid a company to chase some debts and they ceased trading.

 

[Anthony Reeves]

I have been reading with interest the flavour of this thread. I would like to add a few general comments.

Pursuing a director personally is not particularly easy. The courts will rarely lift the veil of incorporation. I am talking from experience as I have been involved in a few cases in this respect. Sections 213 and 214 of the Insolvency Act 1986 relate to wrongful trading and fraudulent trading. It is a collective remedy (ie any monies recovered goes into the pot to be shared among all creditors of a company) that can only be pursued by the liquidator. The liquidator will rarely get involved without funding from the creditors. I have recently argued in a letter to the Ministry of Justice that the Insolvency Act 1986 should be amended to permit creditors to be able to apply under section 213 and 214, subject to obtaining leave of the court. This they have discounted but were more interested in my suggestion to increase the scope of sections 213 and 214 to cover Administrations. Sections 213 and 214 do not cover Administrations. Administrations in my view are the biggest source of abuse, especially pre-packs. There is urgent need for reform in this area.

There are a few other avenues where sometimes you may be able to hold a director personally liable. This would be the "tort of deceit" as well as the principle in Contax v. Wiseman (2007). Basically, this case held a director personally liable where he had signed a writtenorder and made representations at the time that the company was good for the money but he knew that the company would not be able to meet the liability. It was also key that the director was the sole director and effectively the controlling mind of the company. These situations are unlikley to occur very often.

Other situation to bear in mind is section 216 of the Insolvency Act 1986. This is basically where a director of the liquidated company was also a director or shadow director of the new company in the 12 months before the liquidation of the old company and new company's name is similar to that of the liquidated company. In some situations, the director of the new company can be personally liable for debts of the new company. There are three main exemptions that can be used to avoid liability, one of them being making an application to the court within 7 days of liquidation for permission to use a prohibited name (ie similar name). I have successfully pursued cases on the basis of section 216, but these are rare because the rogue directors are perfectly aware of the exemptions they can make use of to avoid personal liability.

I would agree with the other contributions that personal guarantees and proper credit control are important. If companies have proper credit control sections then there would be little need for debt collection companies. Many debt collection companies promise things which are not really deliverable. For example, many talk about usuing statutory demands or winding up petitions as an effective way of pressuring debtors into paying. Firstly, the regular use/threat of a statutory demand by a debt collection company where there is no real intention of pursuing bankruptcy can be a breach of their Consumer Credit Licence and the Office of Fair Trading can and will take action. Also, bankruptcy proceedings and winding up are unlikely to follow in many cases because of the costs of such proceedings.

What many debt collection companies seem to do is play the "harassment card" and try and scare the debtor into paying. This is music to my ears, where the defendant has a legitimate argument, as I love doing battle against the debt collection company employing the broken record technique as I have often succeeded in using the Protection from Harassment Act 1997 to claim damages.

In summary, a company with a good credit control section should follow good procedure (eg, proper terms of business, credit checking) and then decide whether to issue court action if the debtor is good for the money. If a claim is bit more complicated then consider passing it to lawyers. I will be honest in saying that it is going to get more difficult to enforce judgments through the courts especially if some new proposals become law. There is a proposal to prevent an Order for Sale if the debt is less than £25,000. I would like to see the level at a lower figure, eg £5,000. Also, there are proposal to take action against agressive bailiffs. I am happy to see bailiffs properly regulated but I would also like to see them have greater powers of entry. If we make it more difficult to enforce a court judgment, then we are likely to see an increase in the bullying tactics of debt collectors/companies who are even less accountable.

Anthony Reeves
Pinniger Finch & Co, Solicitors

 

[GEKKO27]

Can you tell me what rules 4.228 to 4.230 refer to in regards the Insolvency Act 1986 section 216?

 

[Steve Thornbury]

Feel free to contact me for advice if you wish!

 

[sherry-lee]

Just read this thread and thought I'd mention a couple of things I've seen along the way...

We were able to develop an indemnity clause that allows our client to go after the directors of a company-- normally this would require a notarization of some sort, but a thoughtfully worded clause can bypass this... We are Canadian, but we found a wording that has worked our clause has been proven in court more than once...

On that note- once you do have a director or if you are dealing with individual accounts, one problem we encounter with our clients frequently is not enough appropriate information-- our favourites to prioritize are the Date of Birth (to ensure ease of location in searches for common names) and Motor Vehicle License number-- I'm sure it is similar in the UK, in that when moving, individuals are required to update their license. So if your debtor drives, periodic searches should help locate delinquent accounts that have vanished... as long as they stay within the jurisdiction of their license.

Our company provides 3rd party letters with no recovery fees and this changes the model, in that we can be involved much earlier in the process- when the debtor is still in business and figuring out which invoices he needs to pay.

Properly delivered third party involvement in the early stage can save a lot of hassle down the line-especially when the focus is on civility, rather than harassment- we don't need to be rude and infringing. Our name on the letterhead provides tacit communication that this is an invoice that won't be easy to avoid.

Our staff is legally trained and very professional, but legal demand letters are implemented fairly early in the game. We've found that phone calls and in house efforts become incrementally less effective and it is better to 'tip the hand' early when legal recovery is more likely and insolvency is less so.

These are approaches that have helped our clients a great deal and many of them can be easily applied by individual business operators, hope you find them helpful.

best regards.

Sherry-Lee
Schel Management

 

[KevCredit]

New to the forum, but hoping I can get some 1st hand advice.
As a victim of various bad debts in the past 18 months, I'm intrigued as to whether anyone out there has any experiences, good or bad, concerning the use of Debt Recovery organisations.
In our particular situation we'd be looking to try and recover funds from companies who have gone into liquidation as opposed to just late payers.
Advice so far has been to avoid, but there seems to be so many of these particular organisations out there, they must have some success.
All comments welcome.

Oh RBS and the bank financiers, where do we start! But probably wasn't RBS pulling your credit limits, the debtor protection was being underwritten by one of the credit insurers, like Euler or Atradius, who systematically slashed insurance limits indescrimenantly this time last year. Especially businesses in the construction market. That is the problem where you have a factoring facility that is funding you up an agreed percentage up to the INSURED credit limit. Re: debt collectors. Do not pay an up front fee, choose a no win-no fee company (most charge on a percentage of what they collect) many of the others are sharks!

 

[daniel.benson]

Oh RBS and the bank financiers, where do we start! But probably wasn't RBS pulling your credit limits, the debtor protection was being underwritten by one of the credit insurers, like Euler or Atradius, who systematically slashed insurance limits indescrimenantly this time last year. Especially businesses in the construction market. That is the problem where you have a factoring facility that is funding you up an agreed percentage up to the INSURED credit limit. Re: debt collectors. Do not pay an up front fee, choose a no win-no fee company (most charge on a percentage of what they collect) many of the others are sharks!

I agree never pay an up front fee. I've heard many a story from my clients about how they have paid large amounts of cash up fount and never had anything back.

The only fee I ask my clients for is if the matter has to go to court they pay the court admin fees.

 

[Steve Thornbury]

Re: debt collectors. Do not pay an up front fee, choose a no win-no fee company (most charge on a percentage of what they collect) many of the others are sharks!

Couldn't agree more DO NOT pay up front!

 

[daniel.benson]

Re: debt collectors. Do not pay an up front fee, choose a no win-no fee company (most charge on a percentage of what they collect) many of the others are sharks!

Couldn't agree more DO NOT pay up front!

toooooo many sharks in this industry makes all our companies look bad.

 

[mrhubby]

For every shark there are several good companies out there including several on this forum so please do not be put off but check the company out

Debt collection can be invaluable in assiting and improving credit control for whatever size or type of business.

Wishing all members and visitors the best for 2011

Richard