Is debt collection service business allowed by law?

Debt collection service is a service in which individuals, organizations and businesses authorize businesses that have been granted a Certificate of Business Registration for debt collection services to carry out debt collection activities in accordance with the provisions of law.

Is debt collection service business legal?

Is debt collection service business legal?
Debt collection service is a service in which individuals, organizations, and enterprises authorize enterprises that have been granted a Certificate of Business Registration for debt collection services to carry out debt collection activities in accordance with the provisions of law.

In essence, debt collection service is not bad, does not affect society, and is a normal business activity of the economy. In the US, there is a separate law related to fair debt collection. But in reality, in Vietnam, there are many companies that take advantage of this business service by illegal means such as extortion of debtors' property, causing negative impacts on social order, infringing on the health, spirit, and even the lives of many people.

Therefore, from January 1, 2021, according to Article 6 of the 2020 Investment Law, there are regulations on industries and professions prohibited from investment and business, including debt collection services. Also according to the 2020 Investment Law, the debt collection service contract signed before January 1, 2021; the parties to the contract are allowed to carry out activities to liquidate the debt collection service contract according to the provisions of the law on civil affairs and other relevant provisions of law.

Thus, the current law prohibits the business of debt collection services from being based on the reality that many companies doing debt collection services are hiding under the guise of doing this service but are actually debt collection groups belonging to the mafia, causing negative reactions and negatively affecting society

How are debt collection business activities punished?

Individuals and organizations providing debt collection services shall be punished according to the provisions of law, specifically, in Article 7, Decree No. 98/2020/ND-CP stipulating administrative sanctions in commercial activities, production, trading of counterfeit and prohibited goods and protection of consumer rights:

For individuals:
“1. Fine from VND 60,000,000 to VND 80,000,000 for acts of providing services in the list of prohibited investment and business sectors.

Additional forms of punishment:
Confiscation of exhibits and means of violation for acts of violation specified in Clause 1 of this Article.

Remedial measures:
Forced to return the illegal profits gained from committing acts of violation specified in Clause 1 of this Article.”

For debt collection service business organizations:
According to Clause 4, Article 4 of Decree 98/2020/ND-CP amended by Point b, Clause 1, Article 3 of Decree 17/2022/ND-CP stipulates:

“The fine level prescribed in Chapter II of this Decree is the fine level applied to administrative violations committed by individuals, except for administrative violations at Point p, Clause 2, Article 33, Clause 2, Article 34, Point b, Clause 4, Article 35, Article 68, Article 70, Clauses 6, 7, 8, 9, Article 73 and Clauses 6, 7, 8, Article 77 of this Decree. In case the administrative violation is committed by an organization, the fine is twice the fine prescribed for an individual”

Thus, the fine for an organization providing debt collection services is from 120,000,000 VND to 160,000,000 VND. In addition, this act also results in confiscation of evidence, means of violation and forced return of illegal profits.

How to collect debt legally?
In essence, lending exists in the form of a property loan contract (which can be verbal or written) in many different forms.

Article 463 of the 2015 Civil Code stipulates: “A property loan contract is an agreement between the parties, according to which the lender transfers property to the borrower; when the payment is due, the borrower must return to the lender the same type of property in the correct quantity and quality and only has to pay interest if there is an agreement or if the law stipulates”.

It can be said that the borrower's obligation is to return the property to the lender in the correct quantity and quality and pay interest in the event that the parties have an agreement. The borrower's failure to repay the debt to the lender is an infringement of the lender's legitimate rights and interests, therefore, the lender has every right to collect the debt from the borrower.

To legally collect debt, the first thing to note when collecting debt is not to use force, threaten to use force, or threaten the debtor's health or spirit to collect the debt. The above acts can lead to the debt collector being administratively sanctioned, or even prosecuted for criminal liability for crimes such as intentionally causing injury or harm to the health of others (Article 134, Penal Code 2015); Crime of threatening to kill (Article 133, Penal Code 2015), crime of extortion (Article 170, Penal Code 2015), ...

So, to legally collect debt in case the loan term has expired but the debtor has not yet paid the debt, the lender can apply some of the following methods:

Negotiation, reconciliation
The parties together to resolve issues such as debt repayment period, interest regulations, ... This method is often applied because it is quick and economical, but the recovery efficiency is not high because it lacks binding between the parties and depends on the debtor's goodwill to cooperate.

Resolution according to court proceedings
The debtor's late payment is the basis for showing that the legitimate rights and interests of the lender have been violated, therefore, the party