INTRODUCTION

Debt in the context of this article is a fixed or certain obligation to pay money or some valuable thing or things; either in the present or in the future. A debt exists where a certain amount of money is owed from one person (the creditor) to another (the debtor) due to certain agreements. Contracts are entered and executed between parties for various reasons and when there is a breach or failure of party to perform his part of the contract, and a debt arises, the aggrieved party or in this case, the creditor may commence a process to recover the said debt.

There are various types of debt ranging from active debts which are payable in the lifetime of the debtor, to ancestral debt, antecedent debt, convertible debt, bad debt, fraudulent debt etc.

The type which brings about the concerns of most creditors and debt collectors are bad debts. These are debts which are either never collected, or the interest and the principal sum has its payment past due and remains uncollected or settled. Failure to comply by the due date may occur for many reasons such as: illness, death, bad customer/debtors relationship etc.

It is pertinent to note that loans should be backed by a form of collateral. However, some banks and companies fail to ensure the availability of adequate security before the grant of a loan.

THE ROLE OF A DEBT COLLECTOR

The process of debt collection in many cases involves a debt collector or a debt collection agency, whose primary object is to ensure debts owed to the creditor are successfully recovered.

In order to successfully recover these debts, the collector has to conduct the necessary research in being well abreast with all necessary details of the debtor. Not only should the debt collector conduct research on the debtor, there is also need for a proper examination of the debt in question to better understand what advice maybe best suited for the case and most beneficial to the creditor. The debt collectors could suggest a waiver, debt restructuring, debt adjusting, debt adjustment or a debt write-off.

TYPES OF DEBT COLLECTORS

The types of debt collection agencies include: 

1. First-party Agencies: these are usually subsidiaries or departments of the company that owns the debt; or the creditor. They are called first party because they are a part of the original contract.
2. Third-party Agencies: a third-party agency is usually not a party to the original contract. The creditor assigns accounts directly to such an agency on a contingency-fee basis. The collection or third party agency makes money only if money is collected from the debtor (often known as a "No Collection - No Fee" basis). 
3. Debt Buyers: the debt buyer purchases accounts and debts from creditors for a percentage of the value of the debt and may subsequently pursue the debtor for the full balance due, including any interest that accrues under the terms of the original loan or credit agreement. This is most times the case when Asset Management Corporation of Nigeria (AMCON) is involved in a debt recovery situation. The agency purchases debts from banks or financial houses at a particular percentage which may have reduced the value of the debts, but bears some risks involved in the recovery of the debt.

DON'TS IN THE RECOVERY PROCESS

A debt collector must be careful not to employ any of the following means or methods for debt recovery: harassment, abuse or oppression of the debtor, use of threat or violence, use of obscene languages, employ the use of thugs, mystical, occultic or any diabolical methods; and most of all, the use of the police or other security agents to arrest a debtor. The Police are not empowered by any statutes to recover debts as they are not debt collectors. In the case of Oceanic Securities Int. Ltd V. Balogun & Ors (2012) LPELR-9218, the court expressly mentioned that;

"it has been stated many times that the police has no business in enforcement of debt settlements or recovering of civil debts for banks or anybody".

The failure to pay a debt is not a crime but the issuance of dud cheques to offset indebtedness is a criminal offence. In such circumstance, it becomes fraudulent and security agencies such as the Police or the Economic and Financial Crime Commissions (EFCC) can be contacted, and they may or may not decide to become involved. But it is never really an assurance that the debt will be recovered from the debtor.

PROCEDURE OF DEBT RECOVERY

There are however lawful procedures to recover a debt without violating the rights of the debtor.

Step 1: Attempt to resolve the dispute amicably and obtain payment from your debtor. 

Step 2: Consult a lawyer or a debt collector and at the interview, you will need to present evidence such as delivery notes, invoices, written agreements, letters, emails, memos, etc.

Step 3: The Lawyer or debt collector will analyse and review your claims concerning incidents of the debt.

Step 4: Letter of Demand: the next line of action should be sending a written notice to the debtor, that is to make an introduction, on whose behalf the debt is to be collected, the amount owed or current amount owed where interest has accumulated and stating what further action to be taken in recovering the debt.

Step 5: The lawyer acting on behalf of the creditor can institute an action against a stubborn debtor through a fast-track court procedure known as "Undefended List Procedure” or “Summary Judgment Procedure"; or other procedures provided for in various statutes enabling the recovery of debt. The lawyer may also bring an application for the preservation of the moveable and immoveable property of the debtor pending the final determination of the suit. An action for recovery of debt brought under the AMCON Act, for instance, is likened to a Bankruptcy Proceedings or a Winding Up proceedings, as the case may be.

LIMITATION OF ACTION IN DEBT RECOVERY MATTERS

Generally, the statutory limit for actions pertaining to recovery of debt that arose from a contract is six (6) years excluding the year the contract was entered and executed as provided under Sections 18, 20 and 21(1)(a) of the Limitation of Action Law. What this portends is that an action for recovery of debt becomes statute barred if not commenced within (6) six years from the date a refund becomes due and the Creditor has made a formal demand thereof. However, under the Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, the Limitation laws do not apply. It states that:

"The provisions of the Limitation Law of a State or Limitation Act of the Federal Capital Territory, Abuja shall not apply to matters brought before the court under this Part of the Act".

"The provisions of the Limitation Law of a State or Limitation Act of the Federal Capital Territory, Abuja shall not apply to matters brought before the court under this Part of the Act".

Also, section 35(5) of the AMCON (Amendment No. 2) Act, 2019; excludes the application of a Limitation law or act or similar statutes to a recovery of debt action commenced under the AMCON Act. The provision states that:

"Any statute of limitation of a state or Federal Capital Territory or any statute or rule or practice directions of any court limiting the time within which an action may be commenced does not apply or operate to bar or invalidate any claim brought by the Corporation in respect of an eligible bank asset or brought to recover a debt or enforce any security or obligation of a guarantor or surety in connection with an eligible asset".

LAWS ASSOCIATED WITH DEBT RECOVERY IN NIGERIA

1. Companies and Allied Matters Act (CAMA) CAP C20. LFN, 2004
2. Federal High Court (Civil Procedure) Rules, 2019
3. High Courts Civil Procedure Rules of various States
4. Asset Management Corporation of Nigeria Act (as amended), 2019
5. Economic and Financial Crimes Commission (Establishment) Act, 2004
6. Police Act, CAP P19, LFN 2004.
7. Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, CAP F2 LFN, 2004
8. Bankruptcy Act, CAP B2, LFN, 2004
9. Central Bank of Nigeria Act, 2007 CAP A66, NO. 7 LFN
10. Nigerian Deposit Insurance Corporation Act (NDIC) CAP N102 LFN, 2006
11. Banks and Other Financial Institutions Act (BOFIA) CAP B3. LFN, 2004. etc.

CONCLUSION

The mistake made by most creditors/debt collectors is that they resort to self-help whenever they intend pursing a debt recovery matter. A debt collector must not resort to self-help as it is seen as an extra-judicial measure at debt recovery, and is frowned upon by the Courts. Self-help may expose the creditor or debt collector to liabilities for assault, battery, unlawful detention, false imprisonment, constitutional rights abuse, etc. The debtor may successfully prosecute an action for the enforcement of his fundamental human rights and for the award of punitive compensatory and monetary damages against the debt collector, which may, by far, exceed the debt owed by him.

More so, litigation should be considered as the last option and should be resorted to only when the debtor is recalcitrant and willfully neglects to liquidate his indebtedness.

In an action for recovery of debt, the debt collector must endeavour to act speedily, exerting expressly the interest of creditor as regards the debt owed, by being plain and categorical in carrying out its duties.

 Written by: Chioma V. Basil Esq.

Resolution Law Firm: “Debt Recovery Options in Nigeria by Resolution Law Firm” Cited in https://lawcarenigeria.com/debt-recovery-in-nigeria/ Accessed 13th of January, 2020.  
Legardy Paul: “Creditors Exercising Options For Receivables Management”. Business Credit. 107 (8): 62-63.(September 2005).Accessed 14th of January, 2020. http://wikiusually.com/wiki/Debt_collection
Palmeri Christopher, “Debt Collection Puts on a Suit”. Business Week (3959) 86, (Published 14 November 2005). Assessed 15th of January, 2020. https://en.m.wikipedia.org/w/index.php?title=Debt_collection#/editor/7
Course Manual; “Centre for Debt Recovery Enterprises”: Institute of Debt Recovery Practitioners of Nigeria. Accessed 13th January, 2020.
Section 35 of FCT High Court Civil Procedure Rules 2018. Accessed 14th of January, 2020.
Section 13 Lagos State High Court Civil Procedure Rules 2019, Section 11 FCT High Court Civil Procedure Rules 2018. Accessed 14th of January, 2020.
Section 51 and 52 of the Asset Management Corporation of Nigeria (Amendment No.2), Act, 2019
This provisions are also contained in other Limitation Laws of the various States in Nigeria