Should we use a Debt Collection Agency or a Solicitors Law Firm?

Should we use a Debt Collection Agency or a Solicitors Law Firm?

What are the pros and cons?

These are both great questions!

The simple answer is, it depends on your needs as we will go on to explain.

In this article, we'll talk about the factors that will dictate the reasons you will need to consider before instructing a debt collection agency or a solicitor’s law firm, the questions you should be asking when deciding which one to use, and general price structure as to what you'll likely spend. And by the time you're done reading this, not only will you have a clear sense for budget, but you'll finally be on that path of getting your debt recovered – and be well informed! Let's dive in.

So, just to be upfront and to clarify...

  • No Collection, No Commission
  • No Contracts to Sign
  • No Upfront Payments
  • No Monthly or Annual fees
  • Commission Rate Agreed Upfront
  • Commission Rates From 5% (Lowest Industry Standards)
  • No Additional Costs Unless Approved By You

We will start with the easy bit first… Whichever one you decide to use, ensure that they are regulated by a professional body. For law firms this would usually be the Solicitors Regulatory Authority (or SRA) and for debt collection agencies this would usually be the Credit Services Association or Financial Conduct Authority.

Moving on, typically, a solicitors’ practice would charge either up-front fees, an hourly rate, or fixed fees per stage (or all of the above) so whether your debt is collected or not, you have still paid upfront for a service. There’s nothing wrong with that but you need to be aware to make an informed decision. Debt Collection Agencies tend to operate on a No Collection, No Commission basis or No Win, No Fee – (see our other article about the difference between these two types) which means they only get paid their commission upon successful recovery of your debt. Ask yourself this, which one of the two types will be more incentivised to collect your debt?

A solicitors practice doesn’t tend to do the debt collection piece and usually only gets involved once a case is ready for litigation whereas a debt collection agency usually can do the entire process, from early arrears to pre-litigation to litigation and enforcement, assuming they have an in-house legal department or partner with a reputable solicitor’s firm.

Who has more authority, a debt collection agency or a solicitor’s law firm? In both instances they are considered to be third parties and therefore the psychological difference is virtually the same. Normally, a case will escalate from a debt collection agency to a solicitor’s law firm but very rarely, if ever, is it vice versa. Therefore, you can have best of both worlds by going via the debt collection route first and then escalating to a solicitor’s law firm thereafter. The downside in this approach is time because remember you will not have paid any commission unless your debtor has been paid so you need to weigh up what is important to you – Time or Money.

Pre-litigation debt collection can save you time and money. Whilst it should always be the objective to avoid litigation, sometimes it can be unavoidable therefore thrusting you into a time consuming and expensive process. On the other hand, the mere threat of litigation can prompt your debtor into paying or entering into some kind of negotiation. Both, debt collection agencies and solicitor law firms can do this for you however be mindful of the charging structure of each i.e. commission basis versus hourly rates/fixed fees.

Does a solicitor’s law firm have more powers than a debt collection agency? 

Technically speaking yes but only due to the fact that they are considered ‘officers of the court’ and they can issue legal proceedings on behalf of a creditor whereas a debt collection agency cannot issue legal proceedings unless they have an in-house solicitor. That said, most reputable Debt Collection Agencies will have partnerships with a solicitor’s law firm who in turn would be instructed to issue the legal proceedings on behalf of the creditor. So in answer to the question, Yes but it is not a showstopper.

High Court Enforcement Officers (HCEO) versus Debt Collection Agency? We will cover this in a separate article which you can find here

If you want further information about how we can possibly help, then fill in the form below and one of our representatives will contact you to discuss your requirements.

Contact Us - Info Pages