How are debt collection services regulated?

(Baonghean) - Debt collection services are one of the most sensitive types of business in the financial and monetary market. Defaults caused by illegal lending, or simply complex civil credit issues leading to criminal violations, have created a need to bring debt collection services into a regulated market.

An assessment of the debt collection service business by the Ministry of Finance shows that, according to reports from 43 localities nationwide up to the end of 2015, only 3 localities had debt collection service businesses still operating. Ho Chi Minh City had issued security and order certificates to 34 debt collection service businesses.

During their operation, 18 establishments ceased or temporarily suspended operations due to ineffective business, personnel difficulties, land reclamation, etc., leaving 16 establishments still operating, including: 9 joint-stock companies, 5 limited liability companies, and 2 branches, with a total workforce of 239 people. Da Nang City has 4 businesses with a total registered capital of 6.5 billion VND. An Giang Province has 1 debt collection service business still in operation.

Provinces and cities such as Hai Phong, Nghe An, Hai Duong, Tien Giang, Soc Trang, and Khanh Hoa... once had businesses providing debt collection services, but these are no longer operating, and the number of such businesses is shrinking.

Illustration photo: Internet

Regarding business results, the majority of businesses were operating at a loss. Debt collection services have gradually become more regulated, with businesses operating in accordance with the law, openly and transparently disclosing debt collection and recovery activities, and reducing the number of substandard and "mafia-style" debt collection businesses.

However, the business performance of these companies is low because this is a specialized industry, still relatively new to Vietnam, and the management and debt recovery skills of debt collection service businesses are low.

The main reason for these limitations is that debt collection service businesses have not yet complied with the regulations in Decree 104, primarily violating regulations on the conditions for conducting debt collection services and violating social security and order regulations. The role of state management agencies remains unclear; only when incidents occur do the police intervene to stabilize social security and order. However, Decree 104 does not specify the responsibilities of the Ministry of Public Security, and the police force does not have the authority to impose administrative penalties in the debt collection service business.

Therefore, clearer regulations are needed to inspect and supervise debt collection businesses, and the role of the police force in state management of this activity needs to be enhanced, as only the police force has the necessary personnel, resources, and expertise to bring this activity into order.

Regarding capital requirements, previously, Decree 104 stipulated a minimum capital requirement of 2 billion VND for debt collection service businesses, aiming to ensure that these businesses had the minimum physical infrastructure to operate. However, the 2014 Enterprise Law no longer includes provisions on statutory capital; therefore, for most industries, capital is no longer a business condition (except for some special sectors such as banking and securities...).

Regarding the qualifications for managers and employees of debt collection service businesses: Decree 104 stipulates that managers and employees of debt collection service businesses must meet legal requirements (having full civil capacity, no criminal record) and professional qualifications (having an educational level of university or college degree or higher in one of the following fields: economics, management, law, or security). However, the implementation of Decree 104 has shown that, similar to the business operations of enterprises in other sectors, the professional competence of managers and employees of debt collection service businesses only affects the business's own performance and does not significantly impact the operations of other businesses or the economy as a whole. Therefore, it is not necessary to regulate the professional competence of managers and employees in debt collection service businesses.

It is clear that, in order to effectively operate debt collection services, careful consideration of the legal regulations governing this type of business is necessary. Furthermore, when implementing this model, coordinated action is crucial for managing the debt market in general, and debt collection services in particular.

Red River