Debt collection

Debt collection or cash collection is the process of pursuing payments of money or other agreed-upon value owed to a creditor. The debtors may be individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector. Most collection agencies operate as agents of creditors. They collect debts for a fee or percentage of the total amount owed. Historically, debtors could face debt slavery, debtor's prison, or coercive collection methods. In the 21st century in many countries, legislation regulates debt collectors, and limits harassment and practices deemed unfair.

Invoices are issued with terms of payment. These terms vary widely from 'cash terms', meaning that the invoice is due immediately, to many forms of 'credit terms' (for example 30 days from date of invoice). Unpaid invoices are considered outstanding, and those which remain unpaid for periods longer than their 'terms' indicate are considered overdue. It is the aim of the cash collection function of a business to collect monies for all outstanding invoices before they become overdue and to mediate payment arrangements to ensure that invoiced debts do not become doubtful or bad.

Debt collection has existed as long as there has been debt and is older than money itself, as it existed in earlier barter systems. Debt collection goes back to the ancient civilizations, starting in Sumer in 3000 BC. In these civilizations, if a debt could not be paid back, the debtor and the debtor's spouse, children, or servants were forced into debt slavery until the creditor recouped their losses through the physical labor of the enslaved. Under Babylonian Law, strict guidelines governed the repayment of debts, including several basic debtor protections.

In some societies debts would be carried over into subsequent generations and debt slavery would continue, but other early societies provided for periodic debt forgiveness such as jubilees, or would set a time limit on a debt.

The Bible issues stern restrictions regarding how much interest to charge on a loan. The Quran prohibits any amount of interest on loans given and encourages direct transactions. The Abrahamic religions discouraged lending and prohibited creditors from collecting interest on debts owed. By the Middle Ages, laws came into being to deal specifically with debtors. If creditors were unable to collect a debt they could take the debtor to court and obtain a judgment against the debtor. This resulted in either the bailiff of the court going to the house of debtor and collecting goods in lieu of the debt, or the debtor being remitted to debtor’s prison until the debtor's family could pay off the debt or until the creditor forgave it.

In occupied territories of the Roman Empire, tax collectors were frequently associated with extortion, greed, and abuse of power.

In medieval England, a catchpole, formerly a freelance tax collector, was a legal official, working for the bailiff, responsible for collecting debts, using often coercive methods.

Once debtors prisons were abolished during the early 1800s, creditors had no solid recourse against delinquent debtors. If collateral was involved in the debt, such as with a mortgage, the creditor could take the property in order to indemnify themselves. However, for unsecured debt, creditors could not collect on their investments if the debtors had no money. Even if a creditor obtains a judgment against the debtor in court, collection remains dependent on the debtor's being able to repay the judgment. In a transaction involving the sale of goods, a court could potentially order the goods to be seized and returned to the seller, but many lenders and creditors had limited recourse beyond trying to verify a borrower or customer's creditworthiness before entering into a loan or transaction.^{[citation needed]}