At a glance:
- Yes, collecting debts from clients overseas is possible but not easy though
- Debt collection practices around the world
- Best way to collect debt internationally
It can be challenging to collect debts from people who have moved overseas. Debt collectors often wonder whether they can still recover debts from debtors who are no longer in the country. Yes, but it is a bit more challenging than collecting debt from someone in the same country as you.
First and foremost, one must understand that debt collection laws vary from one country to another. As a result, a debt collector in Melbourne or any Australian debt collector who wants to collect a debt from someone who has moved overseas must follow the laws of the country where the debtor is now located.
The laws of the country in which the debtor now resides may be less strict than the laws of the country where the debt was incurred in the first place. In this situation, it can be more difficult for the debt collector to collect the debt. In other cases, the debt collector may be favoured by the law.
Notably, some countries have stricter privacy laws than others. A debtor’s personal information may not be accessible in some countries, which makes it challenging to locate and contact them. Other countries may provide more information about debtors, making it easier for collectors to locate them and contact them.
In some cases, debt collection services near you can sue debtors who have moved overseas to collect their debts. Although this can be a difficult and expensive process, it is not always successful. Furthermore, many countries prohibit foreign creditors from suing their citizens in their home countries.
International debt collection practices around the world:
If you collect domestic debts, you’re probably somewhat familiar with how the process works – after all, the same laws apply to both you and your debtor. The collection of international debts, however, is different due to the absence of international debt collection laws.
You must follow the laws of the client’s country rather than your own when collecting debts from a client based outside of your country. This means that if you’re collecting debts from a client who has moved to the US, but your company is based in Australia, you must follow US debt collection law.
Best way to collect debt internationally:
Choose the right debt collection partner:
The majority of debt recovery discussions involve debt collection agencies, as they specialise in recovering debt from non-paying clients. The expertise required to pursue an unpaid invoice cannot be associated with every creditor – as a case in point, an ordinary organisation might not have the time or expertise to do so. Nonetheless, it may be better to hire a debt collection lawyer rather than a collection agency in some circumstances.
To determine the best option for you, speak to both collection agencies and lawyers with experience in international debt collection. Some countries’ laws tend to favour attorneys pursuing debt collections over agencies, so the answer may depend on the country where you’re pursuing debt collection. A lawyer would be a better choice if you are expecting a contested claim from the customer.
Choose a debt collection partner with appropriate experience:
Some debt collection agencies have more experience pursuing debts in a particular country than others. Make sure you ask potential agencies if they have experience pursuing international debts, and then opt for a service that can demonstrate clear success in your client’s region.
If you can’t find a native collection agency with experience there, try contacting agencies located in your client’s country. Your client’s debt collection agency will have intimate knowledge of the debt collection process where he or she lives. An agency that works with international clients might be a good fit.
Take a second look before hiring an international debt collector:
It is understandable to want to clear all your debts; however, hiring a debt collection agency might not be the most effective solution to do that. Keep these things in mind before taking the plunge.
It never hurts to make one more request. In some cases, especially if your payment is only slightly late, all a non-paying client needs is a gentle nudge to issue payment.
It is possible to make a difference by charging late fees. Reissuing an invoice with a late fee (or simply implying to do so) can sometimes be enough to get the client to pay. You will also avoid paying a collection agency by taking this approach.
Collection agencies can damage relationships. You may want to wait to hire a collection agency until you have absolutely no other recourse because it may damage your relationship with a non-paying client.
In Summary
Although debt collectors can still collect debts from clients abroad, the process is more complicated and could be constrained by the laws of the country where the debtor is now located. In addition to complying with international laws, debt collectors must also adhere to the privacy laws of the country where the debtor has relocated.
If you struggle to collect unpaid invoices from customers who have moved overseas, you may need to hire a debt collection agency. This is particularly important for specialised sectors like education debt recovery, where students may relocate internationally after completing their studies. Get in touch with eCollect today and let them handle the collection of your debt while you focus on growing your business.
Frequently Asked Questions
Yes, Australian debt collectors can pursue debtors who have moved overseas, but the process becomes significantly more complex. While Australian debt collection laws generally apply to Australian citizens, their enforceability can be limited when debtors move overseas. International agreements and treaties, such as the Hague Convention, can provide a framework for serving legal documents to debtors overseas, though effectiveness varies depending on the specific countries involved.
Debt collectors can indeed pursue debts internationally, but there are no universal international debt collection laws. Each country sets its own rules for how collections should be handled, including everything from licensing requirements to communication restrictions. The laws of the debtor’s country apply, meaning collectors must follow local regulations rather than their home country’s laws.
Legally, there is nothing stopping you from leaving Australia if you have debt, unless the Australian Taxation Office (ATO) issues a Departure Prohibition Order (DPO) against you. A DPO prevents a person who has persistently failed to meet their tax liabilities from leaving Australia before either discharging all their debts or making satisfactory arrangements to do so. However, leaving the country doesn’t make your debt disappear; it remains your legal obligation.
When you leave the country, your debt doesn’t disappear. Creditors and collectors will continue trying to collect payment through phone calls, letters, and other legal means. Missed payments will affect your credit report, potentially causing your credit scores to drop. Eventually, creditors may file lawsuits, and if you don’t appear in court, judgements may be issued against you in your absence. Some countries have reciprocal agreements that allow debt to be chased and enforcement action taken internationally.
It’s important to note that under Australian privacy laws, foreign debts cannot be recorded on your Australian credit report, as credit reporting is limited to credit provided within Australia
Overseas companies seeking to collect debts in Australia must navigate the country’s robust legal framework for debt collection. The Trans-Tasman Proceedings Act 2010 streamlines civil proceedings between Australian and New Zealand entities, making enforcement simpler between these countries. For other jurisdictions, the Foreign Judgements Act 1991 provides mechanisms for enforcing foreign judgements in Australia, though the process is neither easy nor cheap. Companies should work with experienced local debt collection agencies that understand Australian consumer protection laws and licensing requirements.
Debt collectors must operate within strict legal boundaries, even when chasing debt overseas. They cannot engage in harassment or unlawful tactics and must follow the legal guidelines of both their home country and the debtor’s country of residence. Collectors must be properly licensed to operate in their jurisdiction, cannot call at inappropriate hours, and must avoid making threats or legally groundless claims. They can, however, engage with local authorities, use international legal proceedings, and work with international debt collection agencies to recover debts.
In Australia, debt collectors must comply with the Australian Consumer Law, ASIC Act, and National Consumer Credit Protection Act. Since July 2021, providers of debt management services must hold an Australian credit licence.
Yes, debt collectors can still collect debts from clients who travel overseas from Australia, though the process becomes more challenging. The ability to collect depends on various factors, including international agreements between countries, the specific laws of the debtor’s new country of residence, and the size of the debt. Many creditors work with international debt collection agencies or legal firms that operate across borders. While enforcement may be limited, debts remain legally valid and can be pursued through various international legal mechanisms.