Unraveling the Debt Maze: Why Debt Collection Services are Banned in Vietnam

In the realm of finance, debt collection often evokes a mixed bag of emotions. While creditors seek to recover outstanding debts, debtors may feel harassed or threatened by aggressive practices. In Vietnam, navigating this complex landscape requires understanding the legal framework surrounding debt collection, particularly the recent ban on dedicated debt collection services. This article from NT International Law Firm aims to help you with that.

Unraveling the Debt Maze: Why Debt Collection Services are Banned in Vietnam

What were Debt Collection Services?

Prior to January 1, 2021, debt collection operated as a licensed service in Vietnam. Businesses with a “Debt Collection Service Business Registration Certificate” could be hired by financial institutions and lenders to recoup overdue payments. However, this service was often associated with undesirable practices.

Legal Basis for the Ban:

The ban on debt collection services finds its roots in the Investment Law 2020. This legislation, implemented in 2021, outlines industries and activities prohibited from business investment. Notably, Clause h, Article 6 explicitly lists “Debt collection service business” as a banned activity.

Rationale for the Ban:

While debt collection can be a legitimate function, concerns about its potential for abuse led to the ban. Some of the key reasons include:

• Risk of illegal practices: Debt collection often involves sensitive information and emotional situations. Unregulated services could easily resort to threats, intimidation, or even violence to pressure debtors, violating their fundamental rights.
• Protection of debtors: With no clear legal framework for debt collection practices, borrowers were vulnerable to harassment and unfair treatment. The ban aims to safeguard individuals from such injustices.
• Ensuring fair competition: The presence of dedicated debt collection services could give lenders an unfair advantage over individual borrowers, who may lack the resources to defend themselves against aggressive tactics.

Penalties for Non-compliance:

Ignoring the ban on debt collection services can result in significant consequences. Decree 98/2020/ND-CP outlines the potential penalties for such violations:

• Fines: Individuals engaging in illegal debt collection can be fined from VND 60 million to VND 80 million. For organizations, the fine doubles to VND 120 million to VND 160 million.
• Confiscation: Evidence and tools used for illegal debt collection activities can be confiscated.
• Remedial measures: Violators may be forced to return any illegal profits obtained through their actions.

Alternative Debt Recovery Options:

With the ban on dedicated debt collection services, creditors are left to explore other legal means to recover outstanding debts. Some viable options include:

• Direct negotiation: Engaging in open communication with the debtor to reach a mutually agreeable payment plan remains the most preferred option.
• Legal action: Filing a lawsuit in the court system provides a formal avenue for debt recovery. However, this option can be time-consuming and expensive.
• Reporting to authorities: In cases of suspected fraud or asset dispersal by the debtor, creditors can file a report with the police. This can potentially lead to criminal investigations and legal prosecution.

Important Note: Hiring individuals or organizations to engage in debt collection activities on your behalf, including using “gangsters,” remains illegal and carries severe legal consequences. Both the person performing the collection and the creditor who hires them can face penalties ranging from fines to imprisonment.

Conclusion:

The ban on debt collection services in Vietnam reflects the government’s commitment to protect individuals from potentially harmful and exploitative practices. While creditors may face challenges in recovering outstanding debts without dedicated services, alternative legal options exist. By understanding the legal landscape and choosing responsible debt recovery methods, creditors can navigate this complex issue effectively while upholding ethical and legal principles.

NT International Law Firm is Here to Help You

NT International Law Firm is Here to Help You

NT International Law Firm has addressed the question of why you should not hire debt collection companies or “gangsters” to collect what you are owed. If you have any further questions or concerns regarding bankruptcy law, please contact our law firm immediately for expert legal advice.

If you require any legal assistance, please feel free to reach out to us via phone at 090 252 4567 or through email: info@ntpartnerlawfirm.com. At NT INTERNATIONAL LAW FIRM, our team is committed to offering you prompt and personalized advice.

You also might be interested in:

• The 2015 Civil Code in English
• The 2015 Civil Procedure Code in English
• The 2014 Law on Bankruptcy in English