Debunking Myths About Debt Collection Agencies

When you think of the words ‘debt collection’, all sorts of scary things might come to mind. Or, if you’re the one looking to reclaim debt, you might not know what you need to do next. It can be confusing, especially if you’re not sure whether the information you’re reading is about business or consumer debt collection (because they are different!). We’ve already looked at some of the more common myths around the debt collection world, so today we thought we would go through a few of the more uncommon ones for you, so that you know exactly what you’re dealing with, and where you need to go.

Myth 1: If a Debtor Moves, There’s Nothing You Can Do

You might think that if a debtor changes their address, or doesn’t leave a forwarding address, then there’s nothing you can do. But good debt collectors are really good at finding people, using specialist debtor tracing tools. They use things like commercial databases, credit bureaus, trade registers and sometimes even private investigation to find up-to-date contact details for your debtor. Even after a move, there are channels like public records, company filings and trade contacts that can help locate the business or its decision makers. The debt doesn’t simply vanish just because the debtor becomes harder to find.

Myth 2: Agencies Can Ignore the Original Terms or Apply Penalties

Absolutely not. Collection agencies must work within the terms of the invoice or contract that was agreed between you and your debtor. They can’t just invent new contractual obligations, or enforce random penalties that weren’t part of the original agreement. But what they can do is enforce agreed late-payment terms, interest or compensation, which are covered under statutory regulations.

Myth 3: Collection Agencies Always Damage Business Relationships

Sadly, there are some that do. But they are few and far between. Instead, a good agency will emphasise relationship preservation at every stage. They understand that even business debtors are also clients, partners or suppliers. So using harsh tactics can do more harm than good in the long run. A competent agency will use respectful, professional communication, negotiate in good faith, and escalate gradually, all in the name of preserving those ongoing business relationships.

Myth 4: Debt Collection Isn’t Regulated

This is a murky one, because while there isn’t technically a specific regulatory body for debt collection, the agencies are still subject to laws, codes of conduct and regulations that touch on what they do. While consumer debt tends to have more protective legislation, that doesn’t mean commercial debt collectors operate completely unregulated. For example, there are rules about unfair practices, misleading statements, harassment, confidential information and so on. Reputable agencies will always observe the highest standard and keep to these legal requirements. Because business creditors are institutions themselves, it’s often easier for them to assert their rights if an agency acts outside legal bounds.

Myth 5: Once a Debt is Past a Certain Age, You Can’t Recover It

While it’s true that older debts are harder to collect (due to missing records, changed staff, faded memory, lost documentation), the age alone doesn’t always mean they can’t be recovered. Generally, the earlier you refer debts to a collection agency, the higher the likelihood of success. Although debts cannot be pursued after 6 years, there are situations and actions that can extend this timeframe.  Agencies often have methods for gathering evidence (invoices, correspondence, delivery records) that allow claims even when some data has been lost.

Myth 6: Collection Agencies Can Sue Without Your Involvement

Collection agencies act on behalf of the creditor. They usually negotiate, send reminders, call, escalate correspondence—but they don’t initiate legal proceedings. Legal action tends to be a last resort and, the creditor, normally have to agree to the costs and strategy. The agency may recommend court proceedings, but they can’t generally proceed to litigation on your behalf.

Myth 7: Using a Collection Agency is a Sign of Weakness

Completely untrue. Many solid businesses use collection agencies as a standard part of their credit control process. It’s not a sign of failure, but instead of smart cash flow management. Outsourcing collections can be efficient: it frees up internal staff, saves time, and ensures that outstanding invoices are chased professionally. When done right, it shows your business takes its receivables seriously, which can strengthen supplier and lender confidence.

In short, many myths about business debt collection stem from assuming that it’s always adversarial, risky, or legally murky. But with professional agencies, clear contracts, and good process, many of those risks can be managed—and the results can be significantly better than letting debts stagnate and eventually become irrecoverable. Get in touch with our team at Debtcol today for a confidential consultation.