HUNGARY: WHY HIRE A LAW FIRM TO COLLECT DEBT INSTEAD OF A COLLECTION AGENCY?

14 March 2023

In the recent years of crisis, it's becoming more and more common that your business partners fail to pay your invoices. After getting bored of their excuses or silences, there comes a time when you have to put pressure on your debtor. At that point, you either hire a law firm or turn to one of the many debt collection agencies offering “simple and cheap, yet efficient” solutions. But are the latter solutions really that effective? Is it worth entrusting a debt collection agency in Hungary? In our article, we bring up three reasons why you should hire rather a law firm in Hungary instead of a collection agency.

1. Agencies cannot represent you in legal procedures

The main problem with such agencies is that they cannot represent you in legal procedures, so their service has minimal added value.

Basically, they can do the same as you: sending a notice letter. If we consider Hungarian legal procedures, you will need a legal representative in all cases. In liquidations, or high-value litigation, the legal representation is mandatory by law. In the rest of the cases, legal expertise and technical background is also needed, so in the end, the case will land on a lawyer’s desk. With this in mind, let’s jump to the next point.

2. Why would you need an unnecessary middleman?

As mentioned above, it is very likely that a debt collection agency will hand over your case to a lawyer after an unsuccessful notice letter. If so, why would you insert a middleman who takes a cut from the fee without adding any value? Shouldn’t you rather invest the share of the agency in professional legal services?

Not to mention, that it is much more favourable for you if you can communicate with the same person throughout the procedure, who understands your case from the beginning.

3. Legal expertise throughout the process

If the recovery of the debt is important for you, why would you wait months until the agency hands over your case to a lawyer to start the legal work? In fact, your case should be assessed by a lawyer at the beginning, so you can make your decision based on the advice of a legal expert, not based on frivolous promises such as “our agency has 90% recovery rate”.

Finally, we would like to recall an instructive story from our experience: a person hired an agency to recover a debt. Although the agency managed to recover a part, but it came with a price: the agency concluded an agreement containing that “the creditor waives all future claims and considers the accounts settled”.

When the person later started litigation against the debtor on the same grounds, unluckily for him, his claim was dismissed because of the unfavourable agreement the collection agency concluded on his behalf. We don't think any law firm would waive your rights just to close the case as soon as possible.

In conclusion, you should carefully consider choosing a collection agency, because once legal work is needed, the case will be taken over by a lawyer anyway. If so, we think it is better investing the agency’s fee in professional services from the beginning and having your case handled by a legal expert during the entire process.