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Acquiring a good on credit, or requesting a loan, may sound very attractive and get people out of a hurry when they need it, however, the process can become complicated when the debtor is late with the payment and after 90 days of arrears, the support of judicial collection offices may be requested.
Collection has 4 stages based on the length of time the customer is in arrears. Administrative collection occurs in the initial stage of the delay, which goes from day 1 to day 30 of the delinquency. Extrajudicial collection begins after the 30th day of the overdue debt up to 90 days; while judicial collection begins from the 91st day of delay. In the case of preventive collection, there is no delay, which is why many do not consider it a type of collection.
It consists of the prevention of delays in customer payments. The company automatically sends messages, e-mails or alerts to remind the customer to pay and avoid delays.
Preventive collection is applied to the portfolio of customers who are at high risk of late payments. This is usually detected by means of collection management tools that automatically flag clients with economic difficulties, new clients or clients who are indebted beyond their economic capacity.
By applying preventive collections, it is expected to generate payment habits in clients, remind them of the due date for payment and reduce the overdue portfolio due to late payment by delinquent clients.
This is the initial stage of the collection process, which goes from day 1 to 30 days late with respect to the customer’s payment date. It is usually managed internally by the company’s finance area, in which different digital channels are used to remind the payment and, as a last resort, a phone call.
This type of collection is usually done by sending text messages, emails, app notifications or reminder calls. Preventive collections staff usually use a cordial, friendly and gentle tone of communication.
Extrajudicial collection begins 30 days after the original payment date. It usually lasts up to 90 days, during which time the creditor sends text messages, calls or notifications to remind you to pay the debt and the corresponding interest.
In addition, an out-of-court collection fee may begin to be charged for the creditor’s or collection company’s efforts.
This second stage of collection does not yet involve the courts, but the collector’s tone will be a bit more aggressive and persuasive to get the customer to pay as soon as possible.
This is the most advanced stage in which the recovery of the debt is sought through a judicial process. It begins between 90 and 120 days after the last date on which the client had to pay.
On many occasions, collection firms use a threatening, aggressive tone that instills fear in the client by presenting court orders (which are often false) or garnishment documents.
It is a set of actions taken by the creditor from the 30th day of delay in payment by the customer. In this first stage of the collection process collection systems such as text messages, notifications in applications, email, calls, letters, among other means are applied to inform the customer that he has a delay in their payments.
However, if the debt remains unpaid despite the efforts made by the company, the next step will be a judicial collection lawsuit. It should be noted that companies may omit the extrajudicial collection process and resort directly to a judicial one, which implies a very high economic cost.
According to Article 284 Bis of the Penal Code, extrajudicial collection is illegal, since many collection firms use intimidation tactics, verbal aggression or threats to collect the debt.
Other practices considered as aggressive and prohibited are telephone calls after office hours (8:00 a.m. to 8:00 p.m.) and visits by the firm’s personnel to threaten repossession.
The National Commission for the Protection and Defense of Users of Financial Services, CONDUSEF, is the institution in charge of providing information and advice to users who file claims related to collection agencies.
This process can be carried out directly by the institution with which the user owes a debt, or through a collection firm. In this case, the creditor must inform that the debt has been passed to another company that will be in charge of the collection.
In addition, it is important to make sure that the debt has actually been passed on to another institution and that it is authorized to collect the debt.
While interest and contact messages to the debtor may start from the first day of late payment, the extrajudicial collection process may begin after 20 days of delay.
From the 21st day of delinquency, the company may begin notifying the customer about the details related to the debt based on the laws of each state so that the customer is aware of his responsibility to the company with which he contracted the debt.
The extrajudicial legal collection may last from the 20th to the 90th day after the date on which the customer had to make the payment.
The creditor or collection agency must notify the customer that he/she has an outstanding debt.
Payment reminders are sent by means such as apps, text messages, emails, letters or calls.
Home visits to the debtor. This is the last step as it is the most costly means.
Give options to renegotiate the debt.
Creditors should avoid collection efforts by third parties.
Send documents that appear to be judicial writs, such as garnishment notices.
Request that the debtor pay the employee who comes to collect.
Intimidation.
Failure to comply with telephone notification schedules.
If the debtor contacts the company to raise a possible emergency case that caused the delinquency, it may negotiate subsequent payments to settle the debt. However, if after 90 days there is no response, judicial collection may begin through the legal process in which the judge will evaluate the situation and propose a payment plan for the debtor, which must be fulfilled on time.
If the debtor contacts the company to raise a possible emergency case that caused the delinquency, it will be able to negotiate subsequent payments to settle the debt. However, if after 90 days there is no response, judicial collection may begin through the legal process in which the judge will evaluate the situation and propose a payment plan for the debtor, which must be complied with on time.
Judicial collection is the process that seeks to recover debts from delinquent customers through a collection lawsuit in which a judge establishes that the debt must be settled and issues a notice to the debtor.
It is initiated only after 90 days of delay, usually the companies resort to external collection firms that act as intermediaries or mediators between the debtor and the financial entity to require the payment of the debt, or to restructure the payments if the debtor had a problem for which he/she could not pay.
The creditor must file a lawsuit in court to collect the amount owed.
The judge must issue a judgment
If the judgment is in favor of the plaintiff, the judicial collection becomes effective and the court’s notice is issued.
The delinquent debtor must pay its debt within the deadlines established by the court.
In some cases, the judge may dismiss the case if the debtor proves a situation whereby the debt could not be paid.
If you are facing a lawsuit for debt, we recommend you: In case of facing collection firms, remember that they are intermediaries and that you should only pay the creditor who has a legal record of your debt and who represents the finance company to which you owe.
Negotiate and restructure your debt with the creditor. Agreements can be made to set new payment terms and conditions. This stops the lawsuit and starts a new debt to stop the old one. If you reach an agreement, make a formal agreement with the finance company and stick to it so as not to make your problem bigger.
Consolidate your debts. Gathering your debts together will help you lower the interest on your loans, credits or mortgages and, thus, avoid over-indebtedness and a new judicial collection process.
Seek legal advice. Having a lawyer will help you negotiate with your creditor and agree on new payment plans.
Avoid delinquency by organizing your payments and adjusting your expenses to your budget so that you do not fall into debts that are difficult to pay. This will help you avoid over-indebtedness, high interest payments and having to get rid of your assets to pay off your debts.
We recommend you:
Analyze the interest rate of the financier before acquiring a new debt.
Measure the frequency with which you use credit instruments.
Do not take on debts that exceed 30% of your monthly income.
Avoid hasty decisions due to promotions or strategies to make consumers purchase more products and services.
Use mobile applications, agendas or reminders to keep your payment dates organized.
If the amount is not paid in the time stipulated by the judge, the company may proceed with a process of liquidation of guarantees and seizure of assets whose value is proportional to the debt, interest and fees of the judicial collection.
Attorneys are indispensable to carry out all the stages of the process, contact the debtor, start filing the lawsuit and monitor the entire case so as not to miss hearing dates and to know the status of the collection lawsuit so that the company can make timely and effective decisions.
If you are facing a case of this nature, contact us. InLEX & CO we are a tax law firm formed by banking lawyers for handling with financial institutions and we will gladly advise you to face these cases successfully or with any claim or foreclosure action. For more information, call us at 5568401076, send us an email to firma.lex.co@gmail.com, write us through our contact form or WhatsApp.
Carlos Figueroa Rodríguez, attorney at law at Lex & Co. He has more than 10 years of experience in specialized cases involving insurance claims and medical malpractice. He is a graduate of the Universidad Anáhuac and has a Master’s Degree in Constitutional Law and Amparo from the National Bar Association. He also has a Doctorate in Juridical Sciences from the UCI Mexico. Professional license 6577215.
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