In South Africa, debt collectors have been dealt a major setback with new legislation requiring that any debt more than three years old cannot be pursued for collections.
The law is placing added stress on collection firms and call centers and forcing companies to greatly change the way they deal with debt.
Andrew van Niekerk, a director of Teleforge Communications, said the days of companies buying debtor books is essentially over because of the elevated risk. Companies now need to be aware of how many debts in the book they are buying are beyond the three-year limit, according to IT-Online. Teleforge is a call center services firm focused on providing customized software and hardware voice solutions to medium and large call centers.
In the past, collection agencies could collect on debt that was 10 or more years old, or resell debt to other institutions without worrying about the status.
The new law means collection agencies likely will need to invest more in technology, including in areas such as advanced collection management software, progressive and predictive dialers, automated email and SMS communications and automated voice messaging to be sure the maximum exposure to the debtor is reached.
A type of challenge created as a result of the new law was cited in an article in Business Report, a newspaper in South Africa. For many years, Johannesburg, South Africa-based law firm JM Attorneys collected on debts to a health and racquet club in the country. The operator of the franchise, LeisureNet, was liquidated in 2000, and its joint chief executives, Peter Gardener and Rodney Mitchell, were later convicted of fraud.
The company no longer exists, and JM Attorneys, having "bought the debt book", according to industry lingo, is now collecting for its own account. Under the new law, doing so is illegal.