4 Creditor Questions For International Debt Collection

In a global economy, companies that do business abroad will inevitably run into a situation whereby clients do not pay. Those companies generally look for assistance with international debt collection. Often there is an existing relationship with a local debt collection agency, and this agency will use its network to try to collect their outstanding debt abroad. Sometimes, a foreign debt collection agency is hired directly to deal with the cross-border claim. 

Before starting international debt collection, the debt collection agency should ask the creditor the following four questions – and in order to answer them, the creditor will need the expertise, experience and know-how of their debt collection agency.

Why is the Claim Unpaid?

solution creditor debt collectionIt is essential to determine the reason(s) why the debtor does not pay the outstanding debt. Does the debtor have financial issues? And if so, how deep are the problems? If there are no financial issues, is there may be an issue with the delivered products or the services that were provided? If this is the case, can the creditor offer solutions? Or are there other reasons why the debtor is not paying?

Does the Creditor Perceive Willingness to Solve?

This question relates to the previous one. Is there is a willingness on the debtor’s end to look together for a solution? If the problem is financial, is the debtor willing to discuss a payment plan or a settlement, or a combination? If the unpaid debt has got to do with product or service-related issues, is the debtor prepared to discuss return of goods, repair, partial compensation or a discount, or additional assistance in the case of servicing issues?

What is the Leverage the Creditor has?

Before setting out a strategy, it is important for the creditor and the debt collection agency, to understand the context. What leverage does the creditor have? The answer depends very much on the size of the claim, the location of the debtor, the commercial relationship (is there still a relationship or was it terminated?), and the potential legal options. Once the creditor has a full understanding of the leverage, a proper negotiation strategy can be elaborated.

What Cost is the Creditor Prepared to Pay?

costs creditor debt collectionThe final question relates to the costs involved with international debt collection, and what the cost is the creditor is prepared to pay. The answer to the question what the costs will be, depends on the age and size of the claim, the location of the debtor, and if the strategy will entail an amicable approach or legal proceedings. When it is clear what the potential costs would be, and how much the creditor is prepared to pay, the debt collection strategy can be adjusted accordingly. As at the end of the day, international debt collection is all about the economic benefit and keeping the costs for the creditor as low as possible.

Before a debt collection agency starts international debt collection, the creditor should be asked the following four questions: why is the international claim unpaid, does the creditor perceive willingness on the debtor’s end to solve the claim, what is the leverage the creditor has, and what will it will cost the creditor to recover the debt?

If you want to know more about international debt collection in general, and debt collection in Latin America and the Caribbean in particular, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

GDPR and Global Debt Collection

As of May 25, 2018, the GDPR became enforceable. It affects business worldwide and has had a permanent impact on compliance and due diligence.

What does GDPR mean? And how does GDPR affect global debt collection?

What Does GDPR Mean?

GDPR Debt RecoveryGDPR is the abbreviation of “General Data Protection Regulation”. GDPR is a regulation that requires businesses to protect the personal data and privacy of citizens of the European Economic Area (EEA) for transactions that take placewithin the EEAmember states, as well as the transfer of personal data outside the EEA. The EEA includes all countries of the European Union plus Iceland, Liechtenstein and Norway.

The GDPR contains provisions and requirements related to the processing of personal data of individuals. Any company that stores or processes personal information about EEA citizens must comply with the GDPR, even if they do not have a business presence in any of the EEA member states.

The specific criteria for companies required to comply are:

  1. Companies that have apresence in an EEAcountry;
  2. Companies without apresence in the EEA, but whichprocesses personal data of residentsof EEA members;
  3. Companies with more than 250 employees;
  4. Companies with lessthan 250 employees but whosedata-processing impacts the rights and freedoms of data subjects.

In reality, this means that the GDPR covers almost all companies that process personal data of individuals being citizens or residents of any of the EEA members.

How Does GDPR Impact International Debt Collection?

Debt collection agency typically process information, in order to provide their debt collection services. This is especially the case for debt collection agencies dedicated to B2C collections, but it may also cover B2B collections, if the data that is processed contains personal information of individuals.

It impacts international debt collection, if there is a transfer of data from a creditor to a(n) (international) debt collection agency, or from one debt collection agency to another (foreign one), and if the data is related to an individual being a citizen or a resident of any of the EEA members, or if in any other way a collection agency is collecting a cross border claim with personal data of a citizen or a resident of any of the EEA members involved.

Stay Compliant: Having A GDPR Policy In Place

GDPR debt collection protocolsThe so called “data controllers”and “data processors”of personal data must put in place appropriate technical and organizational measures to implement the data protection principles. That also goes for debt collection agencies active in international debt collection, whereby the creditor or the sending debt collection agency is the “data controller” and the receiving debt collection agency the “data processor.

The GDPR basically definesseven key principles, to be taken into account by companies when putting together a protocol for processing personal data of EEA residents:lawfulness, fairness and transparency; purpose limitation; data minimization; accuracy; storage limitation; integrity and confidentiality; and accountability.

The GDPR protects the following information, and technical and organizational protocols should take them into account to build the appropriate GDPR-proof protection mechanisms:

  1. Basic identity information such as nameand last name, address and ID info;
  2. Web data such as location, IP address and cookie data;
  3. Health and genetic data;
  4. Biometric data;
  5. Racial or ethnic data;
  6. Political opinions;
  7. S$xual orientation.

The General Data Protection Regulation(GDPR) requires businesses to protect the personal data and privacy of citizens of the European Economic Area (EEA). The GDPR impact international debt collection, since there is a transfer of personal data from the creditor or a local debt collection agency, to another (foreign) debt collection agency. It is important for the international debt collection agency to be compliant and to have a GDPR policy in place.

If you want to know more about international debt collectionin general, and debt collection in Latin America and the Caribbean in particular, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

International B2B Debt Negotiations

There are several ways for creditors and debtors to engage in International B2B Debt Negotiations.

Which are the most efficient ways?

International B2B Debt Negotiations in Person

What can be one of the most efficient ways of International B2B Debt Negotiations, is for creditor (and / or their representatives like lawyers or a debt collection agency) and debtor to meet each other in person. Meeting each other in person means that people can look each other in the eyes, notice each other’s body language, and connect on a personal level. This can be a positive impulse to work towards a solution for existing issues (whether financial, service-related or with respect to quality of delivered goods). However, in the case of international claims, there is likely a considerable physical distance between creditor and debtor. Therefore, it may not be cost-efficient to have (many) in-person meetings.

Using the Phone to Negotiate an International Debt

Debt Negotiations by PhoneIn International B2B Debt Negotiations, likely most of the negotiations between creditor and debtor will take place by phone. Depending on the complicity of the claim and the negotiations, it may be useful to have several conversations before reaching a conclusion – an agreement, or escalation (engaging third party intermediaries, starting legal action or freeze the commercial relationship, for example). During such conversations, creditor and debtor will be able to better understand each other’s position, show and receive empathy, discuss several potential solutions without formalizing anything yet (as that will happen by email).

Negotiating International Debts via Zoom and Skype

Debt Negotiations by Skype and ZoomAn alternative to phone calls or in-person meetings about international claims, is to engage in negotiations by means of video calls, like Zoom or Skype, or similar Apps. The advantages as opposed to phone calls, is the creditor and the debtor can see each other and make visual contact. This may be perceived as more personalized than a normal phone call, and a suitable (and more efficient) alternative if in-person meetings are not possible due to distance, costs or emergency (like the COVID19 crisis).

International B2B Debt Negotiations via Email

It is nowadays customary to carry out (part of) International B2B Debt Negotiations by email. Negotiations by email are key to summarize phone discussions, send formal proposals, to confirm agreements and to follow up on promises made. However, it should be complimentary to phone calls, Zoom or Skype discussions, or in-person meetings, not replace them, due to the static nature of email negotiations.

Global Debt NegotiationsInternational B2B Debt Negotiations can be done via in-person meetings, phone calls, Zoom or Skype meetings, or email. Probably the most efficient combination is to have phone calls or Skype and Zoom meetings, whereby email is used as a complimentary tool to summarize, send formal proposals, formalize agreements and follow up on promises.

If you want to know more about international B2B debt negotiations, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

KYC Policies in Global B2B Collections

In global business, as part of compliance, it is essential to have a so called “Know Your Client” (KYC) policy in place.

For debt collection agencies that operate in international B2B collections, it is important to understand the nature and background of its clients and the debts the agency handles.

Often the debt collection agency’s client is the creditor of an outstanding debt, but not always. Sometimes, the debt collection agency represents another, foreign collection agency and hence the client’s client is actually the original creditor.

How does this affect a debt collection agency’s KYC policy? 

Definitions of KYC and KYCC Policies

Let’s first define KYC.

As per Wikipedia, KYC is the process of a business verifying the identity of its clients and assessing their suitability, along with the potential risks of illegal intentions towards the business relationship.

KYC also enables businesses to better understand their customers, the kind of business they run, and the transactions they carry out.This helps company to mitigate risk.

KYCC policies debt recoveryInformation a company may look for to receive from their clients includes:organization charts(containing the full legal name, the registered address, description of business activities, and extract from a formal register, like the Chamber of Commerce); details of the Ultimate Beneficial Owner(s) (UBO(s)); the source of funds and / or wealth of the client and its UBO(s); and public office or government position(s) held by the UBO(s).

 In addition, there is also Know Your Client’sClient (KCC).KCC is a verification process that identifies a client’s client activities and nature.

Global B2B Debt Collection: KYC, KYCC & Key Case Information

Debt collection agencies operating in international business, should have a KYC policy in place, which stresses the understanding not only of the client and their business activities, but also the specific cases or sorts of claims the debt collection agency is hired for to collect.

In addition, in those cases in which a local debt collection agency acts on behalf of another, foreign debt collection agency, it is important to know their client’s client and their business activities; and therefore, have a KYCC policy in place as well (as part of the KYC policy).

Key Case Information Debt CollectionFinally, the international debt collection agency should understand the nature of each case it handles. Key case information may consist of: a detailed breakdown of the debt; the full legal name, registered address and business activities of the debtor, as well as key contact persons (which may include the signatory parties or owners); and all supporting documents in connection with the claim, including but not limited to, contracts, invoices, order forms, order confirmations and (relevant, email) correspondence.

In international B2B debt collection it is important to implement a KYC policy. Since in international collections, the debt collection agency often acts as third party as representative of another, foreign debt collection agency, such policy should include KYCC verification. Also, part of the compliance process should be to receive and verify certain key information of the case(s) the debt collection agency will handle.

If you want to know more about international B2B collectionsand compliance, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

Multilingualism in International Negotiations

Why is it important to speak several languages if you are negotiating a cross border deal? Here are some answers.

You can obtain in-depht information about your counterpart

Multilingualism in negotiationsIf you speak the language of the country your negotiation counterpart is in, you have access to much more information than without speaking the language. You can obtain information about the economy, business habits, and political and social circumstances of the country your counterpart is based in. This means you will be able to better understand the context for your negotiations and you can fine tune your negotiation skills and strategy taking into account such specifics.

Being multilingual makes it easier to show and get empathy

languages in negotiationsBy speaking your counterpart’s language and understanding the context his or her business is operating in, you be able to show more empathy. Showing empathy is a key element to successfully negotiate an international deal. On the other hand, if you speak your counterpart’s language, it will be easier for him or her to be empathetic towards yourself, as you will be in a better position to explain in detail your business and what is important for you to achieve during the negotiations.

Multilingualism increases the likelihood of a successful outcome of your negotiations

In depth conversation in your counterpart’s mother language can lead to better overall understanding of each other’s positions. You be able to effectively handle in detail the cross-border negotiation and the likelihood that you will be successful will be higher.

Multilingualism in international business negotiations means you will be able to obtain in-dept information about your counterpart, it makes it easier to show empathy towards your counterpart and get empathy from him or her, and overall, multilingualism will increase the likelihood of a successful outcome.

If you want to know more about multilingualism and cross border negotiations in international business, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

Cross Border Negotiations

Whether you negotiate a commercial deal, or you have to solve a financial dispute, international business negotiations are different from those at home. The international component requires cross border negotiations.

If you negotiate abroad, I recommend keeping the following into account.

Understand the playfield of international business

cross border negotiationsWhen you are in cross border negotiations, it is important to understand the context of the international business deal. What is the value of the deal? Where is your counterpart based? Are they a small, medium-size or big company? Do you have in -depth information as the ownership of the company, the decision makers and what potentially the commercial and financial value is for your counterpart of the deal you are working on? These are some of the questions you may want to ask yourself before you start cross border negotiations.

Define your minimum and maximum leverage

Another aspect of cross border negotiation you should define is the level of leverage you will have. If it is a commercial deal you are working on, ask yourself the question if you have any competition. Your counterpart may at the same time negotiate with your competitor, which may have an impact on your negotiation position. If you are negotiating a financial dispute, you may want to know if your counterpart still needs the commercial relationship for future business. Also, if you may not be able to solve the dispute amicably, check if you have any legal options to potentially enforce a solution by means of legal proceedings. The answer to this question may increase (or decrease) your leverage to find an amicable solution and settle a financial dispute in the most favor ate way for you.

Always show empathy in cross border relations

Whatever your position is in cross border negotiations, always show empathy towards your counterpart. Take your counterpart seriously and listen to their arguments. Be respectful at all times, whether you have to bring good or bad news. This substantially will increase the likelihood of reaching a satisfactory outcome during cross border negotiations.

No matter what the issue is: Be solution minded

If you are negotiating a commercial deal, or you are looking to solve a financial dispute, cross border negotiations solutionsalways aim for the best solution possible. What the best solution possible is, depends on the specific circumstances of the deal or the dispute. In any case, the only way to end up with the best solution possible, is to be solution minded. You should let your counterpart know that your aim is to find a solution. With this in mind, your counterpart will likely move more easier in your direction and a solution comes in sight.

Use logics, not emotions

In cross border negotiations you should always use logics, not emotions. Logics will have you think clearly and act rationally, which is key for reaching satisfactory solution for a financial dispute between the parties or close a commercial deal successfully.  Emotions distract from reality and are generally less of a reliable advisor if it comes down to cross border negotiations.

Create a win-win situation for both sides

When you negotiate, you will obviously want to get the best result possible for yourself. However, please keep in mind that a healthy, long term deal should be good for both parties, not just for one. Therefore, understand that every deal you negotiate should create a win-win situation for both parties. What can be considered as a win, depends entirely on the specific circumstances. Make sure that counterpart perceives that you are looking for a win-win situation. Define which demands are deal terms are important for your counterpart and make a priority list for yourself for those demands or deal terms. The ones which are of minor importance or less material to you, consider giving these away in return for your own priority demands or deal terms.

Monitor and evaluate: the learning curve

cross border negotiatingOnce the cross-border negotiations are over, make sure you continue monitoring your agreement with your counterpart. Also, evaluate the results of the negotiations and the value for you of the deal you reached. It is very likely that this will not be the last time you negotiate in international business, and your aim should be to learn from each time you negotiate. Being evaluating the results of cross border negotiations, you can improve your techniques for next time you negotiate an international business deal or try to solve a cross border financial dispute.

In international business you will regularly participate in cross border negotiations. Some of the aspect I recommend to focus on, are: understanding the playfield of international business, defining your minimum and maximum leverage, showing empathy in cross border relations, being solution-minded, using logics over emotions, creating a win-win situation, and monitoring and evaluating the agreement reached in order to learn for future dealings.

If you want to know more about cross border negotiations in international business, please reach to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

B2B collections in LATAM: negotiate, mediate, settle

If you are dealing with B2B collections in Latin America, you may run into nonpaying debtors, commercial or financial issues the debtor may have, and local situations in Latin America that may considerably complicate succesfull collection.

In order to deal with such situations, change your mindset to negotiations, mediation and settlement.

Negotiations in B2B collections in Latin America

My advice is to be prepared to negotiate. A trigger to negotiate is often the lack of alternatives. Debtors may otherwise take the stand that they will not pay, and the only way to enforce payment, is to start legal proceedings. The latter is a rather unattractive (and sometimes, practically impossible) alternative. This will be discussed in more detail below. Please read the following articles about negotiation in international debt collection and settlement negotiations in Latin America for more insight.

Mediation in B2B collections in Latin America

Another alternative is to look for mediation in Latin America, especially if the amount owed is substantial. An independent third party will in such case be appointed as mediator between creditor and debtor. For more thoughts on mediation in international debt collection, please read this previous article.

Looking for a settlement

The aim of negotiations and mediation with the debtor in Latin America is reaching an amicable settlement. An agreement between creditor and debtor that both parties can live with. A settlement agreement may consist of a one-time payment as full and final settlement, or a payment plan, or a combination. Sometimes, continuation of the commercial relationship between the parties is also agreed, which can be continuation of import / export of delivery of services, whereby for each future payment (usually on a pre-payment basis) part goes towards payment of the debt.

Avoid legal proceedings in Latin America

The recommendation is to at all times avoid legal proceedings in Latin America. Generally speaking, as legal systems and requirements between countries differ, sometimes substantially, cross border files are not sufficiently solid in order to enforce payment by means of legal proceedings. Also, legal may be expensive and with little likelihood to collect, the creditor may end up with high legal bills which cannot be recovered from the counter party, the debtor.

In dealing with a debtor in Latin America, be prepared to negotiate, to mediate, and to settle. Avoid legal proceedings because of its complexity and costs.

If you are doing international business in Latin America and you are interested in learning more on B2B collections, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni