Reasons for Late Payment

History of debt collection

The need to collect on unpaid debts existed long before any type of currency and money was invented. 

Instead, the concept of “being in debt” started with bartering goods and services, when one of the parties could not deliver their product or service as agreed. 

In actual fact, how we have dealt with debt over the years and the history of debt collection dates back to 3,000BC. 

During this time, it is believed that if a debtor was unable to pay their debt, they became `debt slaves` forced to work for the creditor until their labour and efforts were considered enough that the debt was repaid.  This concept of `debt slaves’ became more and more common through many ancient civilisations. 

Moving through the times, `debt bondage` soon became a term used by the Greeks and Romans to specify a category of legal punishment for owing debts.  People could voluntarily enter into this `debt bondage` rather than receiving a harsher, more violent alternative (although let us be clear, debt bondage could also result in a lifetime of hardship). 

The creditor during these times was entirely in control, and as such, they could impose as many restrictions and clauses as they liked, often making the debtor repay the debt over and over again! 

Debt collection history continued and moved at pace, where in the middle ages, we began to see the introduction of Bailiffs and the positive introduction of laws and guidance surrounding debt collection. 

This period in time saw that if a debtor could not repay the debt in full, the creditor could take them to court to seek a judgement against them.  From here, a bailiff would then be instructed to attend the debtor’s property and remove goods to the value of the debt. 

However, unlike today, bailiffs during this time would take much, much more than they needed, sometimes even forcing debtors to hand over the deeds to their property! 

Then came the Victorian era, where we see a different approach taken altogether. 

In Victorian times if a debtor failed to repay their debt, then off to prison they went!  Yes, that’s right, they were instantly jailed until the debt was paid off, or family and friends came forward to pay the debt and ensure their release. What’s more, these weren’t just any old prisons.  Specialist prisons were built to specifically house debtors! 

In the midst of the 19th century, we also saw the rise of `loan sharks,` who made money by charging high interest off short-term loans.  So short in fact that often loans were offered on Monday with repayment required on Friday!  Interest rates were sometimes unachievable to repay at 1,000%! 

Modern day times 

Over the years, laws and guidance vastly changed, especially in 1998 when late payment laws were introduced for commercial debts in the UK.  This was the first time that creditors could legally charge interest on any outstanding debts. 

Further changes also came about in 2014 with the option to charge a compensation claim for late payment.  Today for creditors, this means they can also claim recovery costs if creditors choose to use a third-party business debt collection agency to collect debts owed. 

Commercial collection agencies today 

A lot has changed within the collections industry over the years.  With laws now supporting both the debtor and the creditor (with the introduction of the Consumer Credit Act and the Late Payment Directive).  Agreements, contracts, and formal laws have allowed commercial debts to be settled much quicker and less violently! 

While parts of the middle age court system are still around today, the process and legal options now are extremely complex and consider full situations and all scenarios. 

For small business debt recovery, you can now take several routes to deal with collecting monies due, which consider the size of the debt, the complexity of the situation, etc. 

With unpaid invoices crippling small businesses, and with the Federation of Small Business reporting that most small businesses will be chasing approximately five outstanding invoices at once, taking up roughly an hour and a half of their day, every day, business debt collection still remains vitally important. 

Supporting with collecting unpaid invoices and the management of credit control processes and procedures, a professional, experienced, and trusted commercial collection agency like Direct Route could be the perfect extension to your team. 

To find out more call us on 0330 229 1991