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Service: Debt Recovery
 
Date: 06/06/2012
 
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Beware – Rogue Debt Collectors


It has come to our attention here at ICSM that the rogue ‘Debt Recovery’ merchants might be doing the rounds. Having spoken to a few printers, some of who appear to have fallen foul of them recently, we thought that now might be a good time to cover subject.

Introducing...Lazarus Collections Ltd.

For those of you who haven't encountered such schemes before, they guarantee that they can collect debts from companies that have gone out of business, in some instances several years ago. Their offering can be attractive to the unaware or reckless creditor who has lost a relatively large sum of money...


Always ready to stand corrected, we would be delighted to hear from anyone who has had positive dealings with any of these, where full recovery has been made from the directors of a company in Liquidation, and it didn't cost a penny!


They may quote section 214 of the Insolvency Act, which deals with Wrongful Trading and which states that any director of a company that allows that company to continue trading whilst knowing that it is insolvent may be guilty of wrongful trading. Furthermore, that such a director could be held liable for the debts incurred by that company during the period of wrongful trading.


They may seek to convince you that no director can possibly be unaware of the state of their business prior to calling a Meeting of Creditors - or even to the appointment of a Receiver or Administrator - and therefore that they can be accused of wrongful trading and made personally to pay the debt due to you.


Most likely they will have stumbled across your name on a creditors' list of a failed company and will know that you have been hit. They will make an educated guess from the size of your business in relation to your loss how serious the situation is for you.


You will almost certainly be asked to pay a deposit 'against Court Costs' and we have heard of figures of between £600 and £2,500 - although larger sums have been asked for.


This is where the Guarantee comes in - and goes out! You will be asked to sign a contract instructing them to act on your behalf. This contract guarantees your deposit back but only provided that you allow them to 'exhaust every avenue' to collect the debt.


Subsequently you may receive frequent demands for payments for this charge and that cost (one wonders where the deposit is!) and this could continue until you cry 'enough'!


It is at this point that they could get obstreperous! They will tell you that you cannot have your deposit back because you have not let them 'exhaust all opportunities and avenues' for the recovery of your debt.


How do you deal with such an approach? Here are some points to consider.

  1. Their initial contention is correct - a director convicted of wrongful trading can be made to repay personally, charges incurred during the period of wrongful trading: was your debt incurred during that period? You don't know until after a conviction is given and at that point you don't need the services of a debt collector - the Official Receiver will see that you get your money - eventually - if the director(s) concerned has/have any!
  1. Instances of convictions for wrongful trading are much rarer than, perhaps, they should be. Convictions are more likely to follow a compulsory liquidation but even then they are not the norm. An external third party such as a debt collector is unlikely to be able to initiate proceedings on his own initiative - it most likely would involve a Civil Action, with horrendous costs, far in excess of the deposit you may have paid.

  2. The contract that you will be asked to sign may well prove extremely complex to the non-legal person - so complex that one might wonder if it had been drafted that way deliberately! By signing it you could be committing yourself to paying numerous charges for obscure legal fees, to the point where you can no longer justify to yourself or your colleagues any further expense. At that point you discover that you have lost your deposit. One contract we saw a couple of years ago included the clause 'By signing this Contract you invalidate the Guarantees contained therein'!

How do you get rid of them?

The simplest way is to ask them for a copy of the contract to pass to your solicitor for perusal prior to any signing. Another way to discourage them is to tell them that you do not believe in paying in advance for Debt Collection Services. Most reputable debt collection agencies work on a 'No Collection - No Commission Fee' basis and still manage to make a living!


Try asking them for third-party references - they will most likely invoke a confidentiality clause, which is bunkum! No creditor would object to giving a reference of efficiency to an enquirer - unless, of course, they had been stung! Don't be afraid to show them the door - you are entitled to refuse their services - and without giving a reason.


If you are one of the lucky ones with money to spare, why not give to charity – your money will do far more good that way.


Rupert Rudd
Director, ICSM
01454 322234


Tel 0844 854 1850 ___ Fax 01454 318 517 ___ Address ICSM, 51 Broad Street, Chipping Sodbury, Bristol, BS37 6AD
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