One of the most painful aspects of doing business internationally is the collection of international debt. It can be difficult, which is why it can pay to have an international debt collector working for you. Companies that specialize in the collection of debtsoften have the resources and experience needed to deal with the rules and regulations in different countries as well as their own. They are well versed in the countries that are difficult so that you don’t have to deal with the complications. Some debt collectors will do the job for a very small fee, and sometimes it can even be free.
Having a debt collector working with you can be a cost-effective solution because debt collection abroad takes a lot of time and is a major headache. Some of the common issues encountered when attempting to collect a foreign debt are poor regulations, uncooperative court systems, and foreign debtor insolvency.
Dealing with Uncooperative Courts
“Economic Outlook no. 1213” is the name of a white paper that is very revealing to those in the world of international debt collection. The World Bank conducted a study in 2014 that took an in-depth look at debt collection internationally. Itidentified the countries that are business friendly and those that are not.
At the top of the list are Germany and Japan as the easiest countries to do business with. At the bottom of the list were Saudi Arabia and India due to poor debt collection procedures and corruption. When dealing with a country that has a well-structured court system, it is easier to collect on the debt. Other strategies have to be used in those countries that make it difficult to collect, such as taking advantage of their existing regulations in creative ways.
Navigating Poor Regulations
Unfortunately, some countries have no regulations at all. If they do, they aren’t very strict about enforcing them. If you don’t have rules in your corner, the collections process becomes even more challenging. Some creditors simply stop doing business in a country altogether, which means they eventually give up on the debt. These measures aren’t necessary when you’re prepared.
Some creditors have started battling the international debt collection issue by increasing interest rates for foreign debtors to offset the losses. However, it was said in the New York Times that this might be extreme. Some experts say that the interest rates should be capped, but others argue that capping can have a negative impact on domestic consumer lending. They say that everything from student loans to credit cards could see issues. Internationally, experts say they can’t deal with higher interest rates than they are already seeing.
If a country has sound regulations, their rules may be different from those of other cooperative countries. The good news is that an international debt collector is aware of these differences. One tool that seems to work in multiple countries is the creation of a strict contract from the start. Even some of the most unorganized courts will enforce a strict contract. They take breach of contract very seriously. This means that debt collection can be successful in even the most complicated of countries.
Regardless of regulations, it all comes down to the court system. When a court is weak, the difficulties can be many. This is why many debts turn into write-offs for creditors. It’s also a reason why they withdraw their business. When the risks and the benefits don’t pan out, they stop. However, an international debt collector can be an asset that preserves business dealings within specific countries.
Resolving Foreign Insolvency
The third issue that creditors deal with is insolvency. Debtors can reach a point where they can’t pay their debts. When this happens, it is imperative to do everything possible to work with the debtor or the chances of collecting the money disappears. Not all countries aren’t like the U.S., where you can seize a car, jewelry, or another type of asset and liquidate it. Internationally, the processes are much more difficult.
In some cases, it is possible to arrange for the restructuring of the debtor’s debts. This is similar to Chapter 13 bankruptcy in the United States. The debts are restructured into a plan that is more affordable for the debtor. Some courts in foreign countries are receptive to this and may even have procedures to make it happen. An international debt collector will know what solutions are available.
International Debt Collection Increases Profitability
International debt collection can be a great asset to you and your business. Not only do you save time, you can collect money owed to you that you wouldn’t be able to collect otherwise. The moment you decide to do business in any foreign country, it is good to have your debt collector ready to take on accounts that you may have difficulty resolving.