Popular debt collection services in Vietnam

Debt collection is a difficult operation, this process requires not only effective strategies but also strict compliance with current legal regulations. If not implemented properly, debt collection can lead to violations of the law, causing serious legal consequences and negatively affecting the reputation of the business. In Vietnam, there are many methods of debt collection, however, they are basically divided into two main groups:  legal debt collection and illegal debt collection. A clear distinction between these two groups is crucial to ensure that the debt collection process takes place safely and efficiently. The article  Popular Debt Collection Services in Vietnam will provide readers with information about popular debt collection services, and the pros and cons of each method, thereby helping businesses make the right choice in handling bad debts.

Debt collection company

Debt collection companies are a form of service that many businesses and individuals have turned to to solve debt problems. Debt collection companies often use high-pressure methods, even not hesitating to link up with gangsters to intimidate and intimidate debtors. They use strong measures such as threats, mental and physical pressure, to force debtors to pay immediately. While these methods can help with quick debt collection, they create fear, stress, and resentment in society. In addition, debt collection activities are often very difficult to control, so the authorities often have difficulties in identifying debt collection service businesses, as well as proving the illegal acts of these subjects.

For these reasons, since the Law on Investment 2020 came into effect, the business of debt collection services has been classified as a prohibited business line. Currently, service enterprises on the list of industries and trades banned from business investment can be administratively handled from VND 60,000,000 to VND 80,000,000. In addition, the violating enterprise shall also confiscate material evidence and means of violation for the act of providing illegal debt collection services and be forced to return the illegal profits obtained from the commission of this violation[1]. In addition, if damage to health, human life, or property damage is caused, individuals in the debt collection company may be held criminally liable accordingly.

Related Articles: DEBT COLLECTION STRATEGY

Debt Trading Company

Debt purchase and sale is a written agreement on the transfer of debt collection rights for debts arising from lending operations, payments on behalf of guarantee operations, whereby the debt seller transfers the ownership of the debt to the debt buyer and receives payment from the debt buyer[2].

In particular, the debt seller is a credit institution or foreign bank branch that has debts arising from lending operations and reimbursements in guarantee operations under the signed credit extension contracts of credit institutions or foreign bank branches, which are being monitored for internal accounting.  off-balance sheet on the balance sheet or have been removed from the off-balance sheet of the debt seller and the debtor is obliged to pay money to the credit institution or foreign bank’s branch. Debt buyers include credit institutions, foreign bank branches approved by the State Bank of Vietnam, other organisations and individuals, whether residents or non-residents[3].

In general, buying and selling debt is a form of changing creditors, while the debt still exists. However, not all debts can be bought and sold according to the above regulations. According to Article 4 of Circular 09/2015/TT-NHNN, debts to be purchased and sold must meet the following conditions:

• Dossiers, vouchers and relevant documents of the debt purchased, sold, security contract (if any) provided by the debt seller must fully and accurately reflect the actual status of the debt in accordance with the provisions of law.

• There is no written agreement on not being allowed to buy and sell debts.

• The debt cannot be used to secure the performance of civil obligations at the time of debt purchase or sale unless the secured party agrees in writing on the debt sale.

In Vietnam, the debt trading market is in the process of being formed, so it is still quite new for both sellers and buyers and the State’s operation and management mechanism. Currently, there are only a number of debt trading companies such as the Vietnam Debt Trading Company (DATC) of the Ministry of Finance under the direction of the Government, and some private debt trading companies. However, these private debt trading companies only operate as business consultants or are only usurious lenders and hot loans in disguise. Similar to rental debt collection companies, businesses that buy and sell disguised debts also use methods that do not comply with the law, even despite infringing on the rights, health and life of debtors to recover debts.

Use of debt collection legal services of law-practicing organisations

Using debt collection services of law firms and law offices (hereinafter referred to as “law firms“) is an increasingly preferred method of debt collection and is considered a legally safe and quality assurance measure. Currently, law firms often collect debts through two steps: negotiation and initiation of a lawsuit at the dispute settlement agency. First of all, the law firm will contact, work and negotiate with the debtor on behalf of the creditors about the debt, payment progress and commitment of the debtor. In case the debtor breaches the commitment on the payment schedule, the creditor will have the right to initiate a lawsuit against the debtor to the competent dispute settlement agency. At that time, the debtor’s acknowledgement of the debt during the negotiation stage will be very useful in shortening the time and effort to prove the creditor’s lawsuit request.

One of the outstanding advantages of this method is that the law firm strictly complies with legal regulations, helping to protect the interests of both creditors and debtors. They have the ability to build solid legal records, conduct proceedings and negotiations, thereby enhancing debt collection and ensuring a fair and transparent process.

Online debt collection service applying technology

Online debt collection services applying technology are an emerging method, promising to bring many significant benefits to businesses in debt management and collection. It uses online platforms and cutting-edge technology to optimise the debt collection process, including the use of tools and software that automatically send debt reminder notifications, monitor the status of debts, and analyse data to improve collection efficiency. For example, a company might use automated debt management software like Debtor Daddy or Collectly, which sends debt reminders via email and text, and tracks debtor responses and updates on debt status in real-time. One of the outstanding advantages of this service is its ability to save time and money; technology helps minimise manual intervention and manage debt more effectively while reducing the costs associated with debt settlement. In addition, the online service allows businesses to reach debtors anywhere, extends debt collection capabilities beyond restricted geographical areas, and provides powerful data analysis tools to adjust debt collection strategies in a timely manner.

However,  online debt collection services may lack the necessary personal interaction, especially in cases where large or complex debts require direct negotiation and negotiation skills of those directly involved in debt collection. The reliance on technology also creates risks related to data security and technical issues; If the system crashes or is hacked,  the debt collection process can be severely disrupted. Moreover,  online debt collection services are still in the testing and development stage, have not been widely adopted, and may face challenges in implementing and integrating into existing debt collection processes. Therefore, although this method offers a lot of potential, businesses need to carefully consider and monitor the development of the service to determine whether it is suitable for their needs and conditions.

Above is the general content related to the Popular Debt Collection Services in Vietnam that Phuoc and Partners share with readers. If you have any difficulties related to the legal field, please contact us. Phuoc & Partners is a law professional consulting firm established in Vietnam and which currently has nearly 100 members working in offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also considered one of the leading law firms with specialised staff in the legal field in Vietnam, whose practice areas are ranked first in the legal market such as Labour and Employment, Taxes, Mergers and Acquisitions as well as Litigation. We are confident to be one of the Law Firms providing the best legal services to clients.

[1] Article 7 of Decree 98/2020/ND-CP.

[2] Article 3.1 of Circular 09/2015/TT-NHNN.

[3] Article 3.3 and Article 3.4 of Circular 09/2015/TT-NHNN.