There are many challenges for businesses trying to collect debts internationally. In such a case, it is important to use an international debt collector to collect on the debt. What makes international collectors unique is their knowledge in this area. They have many resources for foreign country regulations and courts. They also know which countries have the most complicated systems. When you have a debt collector working for you, you increase the chance of collecting on the debt. Some debt collectors even does it for free.
Nonetheless, even debt collectors face challenges. These challenges can be timeconsuming, but the right resources mean securing the right outcome. The most common issues faced by those working to collect an international debt are little to no regulations and uncooperative court systems. Another issue is debtor insolvency.
Battling Foreign Courts
In 2014, the World Bank conducted a study that looked at how easily business can be done in countries around the world. This resulted in the white paper “Economic Outlook no. 1213.” The white paper lists the countries where it is easier to resolve debts internationally.
What the World Bank found is that the court systems have much to do with why some countries are easier to do business with. If a debtor must be sued to recover just a portion of the debt, if not all of it, the court system must cooperate. The best countries to do business with, according to the World Bank, are Japan and Germany. Corruption and procedural problems were cited as reasons why Saudi Arabia and India are at the bottom of the list.
Dealing with Regulatory Issues
Little or no regulations is also a culprit behind difficult debt collection. If there is no regulation, then there is a major issue. Not having rules to back you up when collecting a debt can make the collection process impossible. This is why so many creditors simply give up or may completely stop doing business in that country, especially if the losses are too much.
On the other hand, some creditors have started raising interest to combat the losses they experience from debtors that won’t pay. In a New York Times article, this issue was examined; some experts say international interest rates should be capped. However, others say that a cap would cause issues with consumer lending. It is believed that capping interest rates could influence everything from credit cards to student loans. The international community says that they can’t deal with higher rates.
Even in the case where a country has decent regulations, it may have nothing in common with other countries. This is why it’s important for an international debt collector to know how each country works. One thing that can help in different countries is the institution of a strict contract. Even in countries where court systems are weak, a strict contract can help in those that hold debtors accountable when they breach a contract. In countries with lax regulations, a solid contract that coincides with their regulations can have a positive impact on debt collection.
Basically, it comes down to how much the court will cooperate. When a creditor decides to do business in a country with an uncooperative court system, it can be difficult to have a contract enforced. This can turn a debt into a loss. As hopeless as this may sound, there is still hope because of international debt collectors. In the end, it depends on how much risk a business is willing to take.
Dealing with Insolvency
The third issue that creditors deal with is insolvency. When a debtor runs out of money, the odds of collecting debt decreases. In the United States, a debtor’s assets can be seized and liquidated so the debt can be resolved. In other countries, the process is much more complicated, particularly when the court system isn’t interested in helping.
If a country has a structured court system, insolvency can be effectively dealt with. Even if a partial repayment is received, that can be a victory. A debt collector specializing in international collection may be able to get a debtor to restructure his or herdebt so some or all the debt can be resolved. The exact solution depends on the rules in that country.
Choosing International Debt Collectors
Overall, a business can decide to do business internationally or simply leave a specific country alone. The risks must be weighed against the benefits. If you choose the risk, then you will want to have an international debt collector on standby for when a debt goes unpaid for too long. The debt collector will know that country’s regulations, the court system, and other details so the chances of being successful are greater.