What to look out for when calling in a collection agency

  • Shivani Boer
  • How to
  • 27 March 2024
  • Edited 22 November 2024
  • 2 min
  • Managing and growing
  • Finance, Rules and laws

You have tried everything, but your customer is not paying your invoice. You have checked your records and there is nothing wrong on your side. It is time to call in a debt collection agency. This is what you need to look out for.

A collection agency helps you collect unpaid invoices, without the need for immediate court action. For example, the agency can contact your customer on your behalf, send a payment reminder, and give you advice. Keep in mind that such a process is a serious step. It will affect your relationship with your client. As a creditor, you decide how far you want to go to make your customer pay.

Starting the process

If your customer does not pay on time, send a payment reminder after the payment term has expired. You are legally obliged to do so if your customer is a consumer. They then have 14 days to pay the invoice without added costs. You do not have to send a payment reminder if your customer is a business, but it is smart to do so. If the customer ignores the payment term stated in the reminder, send a reminder with collection costs (in Dutch).
You can start a collection process yourself or hire a collection agency. If you go for the latter option, choose a collection agency that specialises in your sector. Also pay attention to things such as reputation, experience, success rate, and transparency in the agency's rates and methods. You can request quotes and read reviews online. Compare different providers and make a choice.

Debt collection services quality act

Collection service providers who focus on ‘natural persons’, such as owners of sole proprietorships (eenmanszaak) and consumers, have to comply with the Debt collection services quality act (Wki) since 1 April 2024. These rules apply only to so-called extrajudicial collection activities. That is to say, there is no court involved, and there are no coercive measures, such as seizure or court bailiffs. Debt collection agencies are also required to register with screening authority Justis. Only registered debt collection agencies are allowed to offer and perform debt collection services without a court order.
The Wki should ensure that creditors know better what debt collection service providers can do for them. The law should prevent unprofessional, unfair, or aggressive debt collection practices. So the rights of, for instance, a sole trader with debts, should be better protected.

Besides mandatory registration, there are also several quality marks for debt collection agencies. For example, the Incasso Keurmerk (in Dutch) for members of the Dutch Association of Certified Debt Collectors (NVI) and the Keurmerk Sociaal Verantwoord Incasseren (SVI, in Dutch).
 

What you need to supply

To help you properly, the collection agency will ask for as much information and evidence as possible. So, for example, supply a copy of your invoice, the payment reminder(s), messages you have exchanged with your customer by email or WhatsApp, and any other relevant information.

Sometimes a collection agency will also ask for proof of delivery of your product or service, general terms and conditions, and agreements. The more information you provide, the better the agency can work for you. Make sure you and the agency are careful with your client's personal data. You must comply with the GDPR. 

Follow-up steps

If the collection agency does not receive a response to the collection letter, they often call your customer first to discuss the situation and propose a payment arrangement. If there is again no response, a second reminder usually follows. Is your invoice still not paid after all efforts? Then you can consider legal action. To do so, engage a bailiff or collection lawyer. They can start legal proceedings. This means that a judge will investigate the matter.

Costs

By law, a collection agency may charge a maximum of 15% on an invoice amount of up to €2,500. The minimum charge is €40, the maximum €375. Most collection agencies work on a no-cure-no-pay basis. You only pay if they manage to get the customer to pay your invoice. The collection costs are also charged to your customer. 

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