It is common for businesses to look for both a debt collection agency and a debt recovery agency, treating them as if they were two distinct entities. In reality, the two labels cover similar ground, and what matters is the range of services offered. This guide explains how to compare a debt collection agency with a debt recovery agency before appointing one.

What a debt collection agency usually does

A debt collection agency generally concentrates on follow-ups such as making calls, sending emails and reminders, negotiating payment dates, and keeping track of promises. It is appropriate for invoices that are not disputed and are only recently past due, where the buyer is slow but willing to cooperate.

What a debt recovery agency usually does

A debt recovery agency typically handles the same follow-up activities and also deals with more difficult cases, such as disputed or long-overdue amounts, formal notices, mediation, and communication with advocates for lawsuits or tribunal proceedings. For large debts, the agency can help plan the course of action, including mediation under Section 12A or the IBC demand notice procedure.

Which should you hire?

If the buyer is cooperative and the invoice is clear, a debt collection agency may be suitable. If the buyer has become unresponsive, the amount is high, or legal action is likely, a debt recovery agency may be the better choice.

For context, mediation under Section 12A generally takes place before a commercial lawsuit is filed. For an operational creditor to file an insolvency application, there must first be a default of at least ₹1 crore following a demand notice under Section 8.

Questions to ask either agency

Whether you choose a debt collection agency or a debt recovery agency, ask:

• What is included in the written scope?
• How will progress be reported, and how frequently?
• Will advocates be involved if legal action becomes necessary?
• How are the fees structured?

The scope matters more than the label, so obtain written responses from every debt collection agency and debt recovery agency you shortlist. This article provides general information only and is not legal advice.

How PayAssured can help

If you require either a debt collection agency or a debt recovery agency, PayAssured can review your overdue invoices and suggest the appropriate level of support. Contact PayAssured to get started.