Debt collection: how it works and what the law allows

Who collects a debt

Your rights if a debt collector contacts you

In the United States the FDCPA applies to third-party debt collectors, 15 U.S.C. 1692a. These are the main protections.

• Time of contact. A collector should assume 8 a.m. to 9 p.m. local time is convenient, 15 U.S.C. 1692c(a).
• Third parties. A collector may not discuss the debt with others such as family or neighbours, 15 U.S.C. 1692c(b).
• Stop contact. A written notice that you refuse to pay or want contact to stop ends most communication, 15 U.S.C. 1692c(c).
• No harassment. Threats, abusive language and repeated calls to annoy are forbidden, 15 U.S.C. 1692d.
• No false statements. A collector may not lie about the amount, the legal status or pretend to be a lawyer or official, 15 U.S.C. 1692e.
• Validation notice. Within five days of first contact the collector must send the amount and the creditor. You have 30 days to dispute it, 15 U.S.C. 1692g.

Debt collection rules in other countries

• South Africa. The Debt Collectors Act 114 of 1998 requires anyone who collects debts for others to register with the Council for Debt Collectors. Ask a collector for the registration certificate.
• United Kingdom. A business claiming a debt from an individual follows the Pre-Action Protocol for Debt Claims. It sends a Letter of Claim and gives 30 days to reply before going to court.
• United Kingdom, business to business. A supplier can claim statutory interest of 8% plus the Bank of England base rate and a fixed recovery sum, according to GOV.UK.
• Other countries. Each one has its own rules, often inside lender regulations and consumer protection laws. Check the rules for your country and sector before a formal step.

How a business collects its own invoices fairly

Most money owed to a business is not a dispute. It is an invoice the customer forgot or postponed. A fair process recovers most of it without an agency.

1. Remind three days before the due date with the amount and a way to pay.
2. Remind again on the due date.
3. Follow up three and seven days after the due date. Ask for a date to pay.
4. Record any promise to pay and remind on that date.
5. Offer a payment agreement letter when the customer cannot pay at once.
6. Send a final demand letter with a deadline when reminders fail.
7. Only then hand the account to a solicitor or a collection agency.

Debt collection timeline with figures

A gym in Nairobi bills members KES 4,000 on the 1st of each month. One member has not paid October.

Collection practices to avoid

• Contacting the customer's employer, family or friends about the debt.
• Posting the debt in a group chat or on social media.
• Threatening steps you cannot take, such as arrest.
• Adding fees that the contract does not allow.
• Calling or messaging late at night or many times a day.
• Using wording or logos that look like a court or a government office.

When an outside collector makes sense

An agency or a solicitor fits balances that are many months old, disputed or owed by a customer who stopped answering. The fee is usually a share of what is recovered.

Balances under 60 days usually come back with good reminders. Keeping them in-house costs less and keeps the customer.

What to send before passing a debt to a collector

A collector or a court will ask what the business did first. A clear paper trail also settles many debts before that point.

1. Reminders before and after the due date, with the invoice number and amount.
2. A statement of account that lists every open invoice and payment.
3. An offer of a payment plan in writing, with dates and amounts.
4. A final demand letter with a deadline of at least 14 days.
5. A record of the customer's replies, promises and any dispute.

Keep copies of each step with its date. If the customer disputes a charge, answer the dispute before any further step.

Debt collection letters and messages

Most debts are settled with written messages before any call. Each stage has its own tone.

Keep every message factual. State the invoice, the amount and what the customer can do next.

How long a business can collect a debt

Every country sets a time limit to start a court claim over an unpaid debt. The limit and the date it starts from change by country and by type of contract.

The safe habit is to act early. A debt chased within the first 90 days is far easier to recover than one that waited a year.

Check the limit that applies to your contracts with a local lawyer before an old balance passes it.

How a business that bills every month keeps balances from ageing

Makatea is software for businesses that remind their own customers. It sends each reminder on WhatsApp and email from the business, with its name, the amount and the due date. It records every payment and every promise to pay.

Makatea is not a collection agency and does not collect debts for third parties. Start free for 14 days with no card.

Sources

• Fair Debt Collection Practices Act, 15 U.S.C. 1692 to 1692p, United States Code on govinfo.gov, read 15 October 2026.
• Debt Collectors Act 114 of 1998, sections 1 and 8, South Africa, justice.gov.za, read 15 October 2026.
• Pre-Action Protocol for Debt Claims, paragraphs 1.1 and 3.4, published on GOV.UK, read 15 October 2026.
• Late commercial payments, charging interest and debt recovery, GOV.UK, read 15 October 2026.