Locate missing debtors and provide evidence
In most debt collection cases, there’s a company that wants to be paid for the work they’ve done. Or there’s a bank trying to recover a large unpaid loan or repossess assets to sell to cover the loan.
Ideally this will happen with a minimum of fuss, but it doesn’t always work out easily. The company sends an invoice reminder, but the invoice goes unpaid. Then they try to contact the debtor, but the debtor doesn’t pay or doesn’t return calls.
So what happens next? Let’s uncover the debt collection process and how private investigators can help.
What’s the debt collection process?
At this point it’s common for the creditor to engage a debt collection agency. The debt collectors send letters, explaining that the money is due, and asking the person to get in touch. Often, the debtor has been too embarrassed to admit that cash flow is the problem, and the debtor agrees to pay in instalments. This is a pretty good outcome for all parties.
Debt collection agency fees vary. As a guide, creditors can expect to pay fees of 25% of small invoices (under $1,000), about 12% of debts $1,000-$5,000 and about 5% over $20,000. So that’s about $1,000 to recover the remaining $19,000, which seems quite reasonable. It’s certainly better than not getting the money back at all.
The debtor can choose to challenge the claim, if they believe they do not owe money. Perhaps the company and the debtor had a disagreement over the supply of a service; the company claims they finished a job but the customer isn’t happy with the work. This kind of dispute can be resolved through a debt negotiator or through a lawyer.
If the debt collection agency is unsuccessful, or if the debtor refuses to pay, they’ll refer the case to a lawyer.
Lawyers have a specific legal process they have to follow, including:
- notifying the debtor of their client’s intentions to recover the debt
- giving debtors fair notice that the money is owed, and by when
- serving legal papers asking the debtor to appear in court
If the lawyers know where the debtor lives or works, they can deliver legal notices in person and get on with the process.
Issue a letter of demand
After an invoice is well overdue, and attempts to contact the debtor have failed, lawyers issue a letter of demand to debtors.
The letter of demand is a final notice, which outlines the amount of money that is owed and the date by which it must be paid. The letter usually goes on to say that if the debtor doesn’t pay in full by that date, the company will start legal proceedings.
This is serious business, and a letter of demand may be enough to make the debtor cough up the cash (if they have it).
Serve legal papers
The next step is usually to serve a notice of legal action, which says the creditor is suing the debtor to get their money.
If the case goes to court and the creditor is successful, the debtor will have to:
- pay the debt
- pay their own legal fees
- pay the creditor’s legal fees
and that gets mighty expensive. It’s certainly cheaper in the long term for the debtor to agree on a payment plan and chip away at repaying the debt.
Occasionally, debtors go missing, especially when the debt is a huge amount. If the lawyers can’t find the person, they can’t follow their correct process, and that’s when private investigators can get involved.
Locate a missing debtor
The most common way that private investigators get involved in debt collection cases is in helping the lawyers locate a missing debtor. If they suspect the debtor has left town and gone into hiding to avoid the debt, the process of finding the missing person is also known as a skip trace.
Private investigators usually start with a database search and internet search. Some information about the missing debtor’s location may be in the public record, such as the electoral roll or vehicle registrations. Next, private investigators search databases including credit history, professional memberships and employment history.
The truth is, it’s pretty hard to completely disappear. Unless the missing person is constantly vigilant, they’ll leave a trail of information behind. Social media activity and history might give away the location of their favourite pub or sporting club. Friends lists can reveal names and contact details for people who might be able to reveal the debtor’s new location.
Good private investigators have a real knack for interviewing and getting information out of people. The PI would gently ask around, saying they’re working on finding a person who is missing, without mentioning the reason. A guy at the pub might be helpful enough to say “Oh yeah, Greg, he’s always here on a Thursday night” and before you know it, the debtor has been located.
Provide evidence for the debt recovery court case
A debtor owes a lot of money, and claims they can’t afford to pay it. They might even be filing for bankruptcy to avoid paying the debt.
But what if their lifestyle suggests otherwise?
If the debtor is splashing money around, buying expensive cars, dining at fancy restaurants and booking holidays, chances are they’ve got some money to repay the debt. They just don’t want to part with it.
A private investigator can run surveillance operations on the debtor and provide photographic evidence to add to the legal case. PIs are excellent at blending in and going unnoticed. Plus they have high tech gadgets like body-worn cameras and recording devices so the subject doesn’t know they’re being filmed or recorded.
Once the debtor has been located, the case goes back to the lawyers to complete.
Debt collection scams
Unfortunately, there have been cases in Australia of scammers posing as debt collectors to con people out of money. The most common method scammers use is to call claiming the customer has an overdue account (utilities and the ATO are popular claims), then they use threatening language to pressure the person to resolve the supposed debt immediately over the phone.
If you think that you or someone you know has been scammed by a fake debt collector (or a scammer tried to get money from you), you can find out more information at Scamwatch and report a scam to the ACCC. I
The first step you need to take if you want to avoid being scammed is to read the Ultimate Guide on how to tell if the website is legitimate.
Want to know more about hiring a Private Investigator?
Contact an Australian Private Investigator today. We’ll be happy to answer any questions you have about how a PI can help you or refer the best available Investigator. Feel free to get in touch.