Though ADR mechanisms as well as modern recovery strategies play an important role in prompt debt recovery, the importance of the traditional collection methods by the Courts cannot be underrated. Collection agencies resort to Court to either commence actions to recover debts from obstinate debtors or apply for leave of Court to register and execute a judgment or arbitral award. However, the undue delay in the resolution of cases is an impediment to the collector's onerous task. Interestingly, the Chief Justice of Nigeria's practical steps towards checking the delays associated with the justice delivery system at various levels of the judiciary is already reaping dividends.
Unlike other jurisdictions where debt collectors are required to be licensed and an applicant for debt recovery license is required to demonstrate a basic knowledge of the debt collection legislation and his character is tested prior to being considered for a license, in Nigeria, there is no provision for debt recovery license. This has given a leeway to persons of questionable character to engage in the debt recovery business. But as the Nigerian economy gradually move from a cash economy to a credit economy, there will be an inevitable need for the debt collection business to be regulated to ensure best practices and checkmate unscrupulous persons from engaging in the business.
Again, in some jurisdictions, there are various debt collection legislations which enable collection agencies perform more effectively. For instance the North Carolina's Mortgage Debt Collection and Servicing Act came as a response to the increasing mortgage defaults and the legacy of subprime mortgages. Also, in rem action can be maintained against the property of insolvent or dubious debtors in United States, United Kingdom, Philippines, Australia, Colombia and Ireland. In Nigeria, apart from the Bankruptcy Act, the general Winding-up Rules under the Companies and Allied Matters Act and the recent Asset Management Corporation of Nigeria Act which established the Asset Management Corporation of Nigeria for the purpose of resolving the non-performing loan assets of banks, there are no legislations regulating insolvency and debt recovery in the private sector. It is expected that as the effect of the Asset Management Corporation of Nigeria Act takes root, other legislations on debt recovery in the private sector will follow.
Furthermore, the poor record keeping of most business and public registries is a bane to effective debt recovery. This is because it is difficult for outstanding debts to be recovered when basic information such as the name, contact details and payment status of the debtor are inaccurate. Most public registries still store files and information manually. There is no proper record of persons living in Nigeria. Nonetheless, there is a growing consciousness for businesses and government agencies to send their staff to periodic training on accurate records, safe custody, preservation and monitoring of records. The government has taken concrete steps for information at public registries and the records of persons living in Nigeria to be stored and maintained electronically instead of the manual system of old.
Besides, the overreliance of businesses on in-house collection has over a period of time led to a decline in recovered debts. The harsh economic reality of the 21st Century has made recovery of debts challenging and expensive. Nevertheless, the future looks bright as more businesses, banks and government agencies are becoming aware of the benefits of retaining the services of an efficient external debt recovery agent. Moreover, there is no denial that corruption and nepotism especially in the banking sector plays a significant role in the accumulation of bad debts. For instance, before the recapitalization of banks in 2005, huge sums of depositor's funds were given out on loan to friends and family members without adequate or no collateral at all. It became difficult for these loans to be recovered. This led to the increase in the number of failed banks and its subsequent acquisition by other viable banks. Conversely, the Central Bank of Nigeria's polices and periodic monitoring of banks after the recapitalization has led to a more transparent process of advancing loans therefore making the banks solvent. The conviction of prominent bank executives who advanced these loans has served as a deterrent to others.
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