Third-Party Debt Collection
In business operations, many enterprises face difficulties when partners, customers, or obligators delay payments, evade obligations, or prolong the debt settlement process. In such cases, one commonly considered solution is authorizing a third party to participate in debt collection. However, not every enterprise clearly understands whether third-party debt collection is legal, the authorized scope of work, legal boundaries, and when it is advisable to hire a lawyer for assistance. The following article will clarify the legal framework, scope of authority, and important considerations when enterprises choose a third party for debt collection.
1. Is third-party debt collection legal?
The participation of a third party in debt collection is entirely legal, provided that this activity is based on lawful authorization or the transfer of the right to demand payment, and does not operate as a “debt collection service” business.
Specifically, debt collection through a third party means the creditor does not directly implement debt recovery measures but proceeds through another organization or individual. According to Article 562 of the Civil Code 2015 on “Authorization Contracts”, creditors have the full right to authorize a third party to perform debt collection tasks on their behalf. Lawful subjects typically chosen include Lawyers, Law Practice Organizations (Law Firms/Law Offices), or legally operating debt-trading enterprises.
The authorization must be established in writing, either as an authorization contract or a power of attorney, clearly defining the scope, authority, and responsibilities of the authorized party. This authorization allows the party directly dealing with the debtor to shift from the creditor to the authorized organization or individual. This serves as a crucial legal basis for enterprises to cooperate lawfully with third parties.
In Vietnam, the debt collection service business is officially prohibited under Article 6 of the Investment Law 2020 (currently regulated under Article 6 of the Investment Law 2025), as many businesses and individuals exploited “hired debt collection services” to commit illegal acts. Therefore, any debt collection activities disguised as a debt collection service business, or organizations “hiding” behind security companies or financial consulting firms to collect debts, are illegal.
2. Authority of the third party during debt collection
Upon lawful authorization, the third party acts as the creditor’s representative to resolve the debt. The legal scope of work for the authorized representative includes looking up and verifying the debtor’s information, sending payment demand letters, and representing the creditor in meetings, negotiations, and arranging repayment plans. If authorized to act during the dispute resolution phase, they can also represent the creditor in court or commercial arbitration proceedings, as prescribed in Article 186 of the Civil Procedure Code 2015 and Clause 2, Article 55 of the Law on Commercial Arbitration 2010.
However, this authority is strictly limited. The third party is only permitted to perform tasks within the scope of the authorization document. The representative must absolutely not perform actions outside the authorized scope, such as arbitrarily changing the debt amount or waiving the debt without the creditor’s written consent, or utilize illegal debt collection measures.
3. Prohibited activities for third parties in debt collection
To prevent illegal debt collection, the law strictly forbids both third parties and creditors from engaging in acts such as using violence, threatening to use violence, mental intimidation, or defaming the debtor’s honor and dignity. Additionally, actions like telephone terrorism, spam messaging, harassing the debtor’s relatives, friends, and colleagues, as well as acts of throwing paint, dirty substances, and causing public disorder at the debtor’s residence or business premises are strictly prohibited.
If a third party intentionally commits these acts, they will face significant legal risks, ranging from administrative penalties to criminal prosecution under the law. Notably, creditors may also face joint liability if they are fully aware of yet intentionally hire individuals or organizations committing these violations to execute debt collections.
4. Procedures for authorizing a third party to collect debt
For the authorization to be legally valid, enterprises must carefully prepare the procedural aspects, especially the authorization documents. A basic dossier requires an Authorization Contract or Power of Attorney, accompanied by all documents proving the debt, such as economic contracts, invoices, debt reconciliation minutes, financial documents, commercial documents, and other evidentiary materials.
In the authorization document, parties must clearly stipulate the information of the authorizing and authorized parties, as well as the specific scope of authorization (e.g., negotiation, sending official letters, initiating lawsuits, or executing judgments). The authorization term, along with the rights and obligations of both parties, must also be clearly stated. An important note is that enterprises should include a clause explicitly prohibiting the third party from committing illegal acts during the debt settlement process, in order to comprehensively eliminate joint liability risks for themselves.
5. Should enterprises hire a lawyer as a third party to assist in debt collection?
Authorizing a Lawyer or a Law Practice Organization is considered to bring outstanding safety and effectiveness. Lawyers are legal experts with professional skills who clearly understand how to execute debt collection lawfully. The involvement of a Lawyer or Law Practice Organization not only creates pressure, forcing the debtor to take the matter more seriously, but also helps the enterprise avoid direct confrontation and unnecessary conflicts with the debtor.
Enterprises should consider hiring a lawyer when the debt is long overdue, the debtor shows signs of stubbornness, asset dispersion, or evasion, or when the debt is complex, lacks sufficient documentation, and carries a high risk of complicated disputes. In these cases, a lawyer will help assess the strengths and weaknesses of the case file, devise appropriate negotiation measures, and assist the creditor in filing lawsuits at Court or Arbitration, as well as provide close support during the Judgment Execution phase if necessary.
6. Frequently asked questions when enterprises hire third-party debt collectors
6.1. Can the third party work directly with the debtor on behalf of the enterprise?
The third party can absolutely work directly with the debtor on the creditor’s behalf, as long as the work falls within the scope of the creditor’s lawful authorization document. Having an authorization document is mandatory, as this is the foundation for the debtor and competent authorities to work with the third party.
6.2. Does the third party have the right to sign minutes, payment agreements, or receive money on behalf of the enterprise?
Regarding the right to sign minutes, payment agreements, or receive money on behalf of the enterprise, the third party is only allowed to perform these actions when the authorization document clearly includes clauses permitting them.
6.3. If the third party commits an illegal act, does the enterprise bear joint liability?
If the third party commits an illegal act and the enterprise (the creditor), despite knowing, still agrees to let the third party perform those acts, the enterprise may be held jointly liable. Conversely, if the third party commits illegal acts and exceeds the scope of authorization, the enterprise does not bear joint liability.
6.4. Is it necessary to hire a lawyer for debt collection?
Hiring a lawyer for debt collection is necessary, especially for high-value or long-standing debts, or when the debtor shows signs of evading payment obligations. With their legal knowledge and practical experience, lawyers can assist enterprises in evaluating the debt, selecting appropriate settlement options, and minimizing legal risks during the recovery process. The involvement of a lawyer not only enhances debt collection efficiency but also ensures the process complies with the law, avoiding potential violations that may arise.
In summary, engaging a third party for debt collection is a solution many enterprises consider when debts are prolonged, difficult to settle, or carry potential disputes. However, to ensure collection efficiency and limit legal risks, enterprises must clearly understand the conditions for third-party participation, the scope of their authority, and the acts strictly prohibited by law. When it is necessary to evaluate a case file, develop a debt settlement plan, or legally authorize debt collection, enterprises should proactively consult with a lawyer for specific advice and to select the appropriate solution. If your enterprise requires assistance, please contact the Lawyers at TNTP for consultation and accompaniment throughout a methodical and lawful debt settlement and recovery process.
Best regards,
