What the debt collection process consists in, i.e. what tools, legal measures and methods are used by the debt collectors – we have been writing about it in our Guide already many times – inter alia in the text: A specialist can do more.
And what does such cooperation between the creditor and the debtor look like in formal terms? While accepting the order, the debt collection company usually signs the agreement on the trust transfer of receivables with the client. It is the most preferred form of cooperation: the creditor orders recovery of the debt and it is where their role ends while the debt collection company may act faster and more freely.
What does the effectiveness of this solution result from and what does it mean for the original creditor?
The psychological aspect is important but let us explain: within the agreement on the trust transfer of receivables, the Trustee (the Assignee, which in this case is the debt collection company) acts on its own behalf but in the interest of the client (the Assignor, the transferor of the receivables). The Trustee acts as a new creditor in relation to the debtor and to third parties. Having the assignment of the receivables, it does not have to hold any other power of attorney and authorisation and it accelerates the whole process very much as well as facilitates the work both of the mediators and of the lawyers engaged in court enforcement of the debt.
The agreement on the trust transfer of receivables concluded for the purposes of debt collection determines in detail the scope of cooperation between the parties but its content is not disclosed to the debtors or to third parties.
Coming back to psychology: occurrence of the receivable usually has a specific context. The creditor and the debtor are often long-term cooperants, sometimes even friends.
The agreement on the trust transfer of receivables has an advantage consisting in the fact that the Trustee, being a new creditor of the debtor, may perform the role of a mediator and conduct discussions with the debtor in separation from the conflict and emotions that sometimes accompany the occurrence of debt.
What is more, the Trustee, i.e. the debt collection company, does not have to refer in any way to the events that took place between the creditor and the debtor. It may be very important in the special case, in which the debtor has mutual claims in relation to the creditor.
Another easement is the fact that the Trustee, dealing professionally with pursuing of claims – a debt collection company or a legal office – may refer the claims for payment to a court that has jurisdiction over its registered office, which is very important for process economy.
Contrary to the concerns of the majority of the creditors, provision of the Trustee with the entitlements resulting from the assignment of receivables does not entail any threat. In the described case, the transfer of receivables takes place in formal sense but it does not have to mean that the assignor stopped being the creditor in economic sense.
Conclusion of the agreement on the trust transfer of receivables also does not affect the entitlements of the creditor to include the receivables in tax-deductible costs, which will be possible to be used if the circumstances provided for in the tax law, e.g. the enforcement proceedings against the debtor are discontinued as ineffective, take place.
Published on: 9 November 2016