Ever since NAFTA entered into force in January of 1994, Mexico has become one of the largest trade partners of the United States (US). As such, and because of its close proximity, commercial collection agencies are receiving more and more debt recovery cases from Mexico
Most people see collecting debt in Mexico as a complicated and near impossible process. Though not impossible, as with all international debt recovery efforts, it’s important to understand the laws and procedures of Mexico when attempting to collect on a debt. Every country has their own set of rules and regulations when it comes to international debt collection making it difficult for someone outside of a Commercial Collection Agency to handle the debt recovery.
Unlike in the US, collection costs and interest are not standard. Though they are enforceable, most debtors in Mexico will use those as bargaining chips to negotiate a more favorable settlement. Also, the process of communicating with customers regarding the collection of accounts receivables (Also known as “dunning”) is not standardized making it difficult to communicate with your debtor. Your best option, in this case, is to send a notarized formal letter via a commercial collection agency.
Below are 5 things we believe need to be evaluated and considered before preceding with collecting debt in Mexico:
How old is the debt?
Before beginning your debt recovery efforts, it’s important to take note of the age of the outstanding invoice. As with all debt recovery efforts, the age of the debt is very important. Staying on top of your debt recovery efforts, especially when collecting debt in Mexico, is essential. Our client case histories show us, outstanding invoices older than 1 year prove very difficult to collect against.
Is your debt consumer or commercial?
Another important consideration before attempting to collect debt in Mexico is the relationship of the debtor. When it comes to collecting on consumer (personal) debts internationally, the response rate is generally very low and therefore less likely to be retrieved. Commercial/Business accounts on the other hand, or more likely to be responsive resulting in a full or partial payment of the outstanding debt.
What is the size of the debt?
When considering your collection efforts, it’s important to weigh the costs associated with collecting the outstanding debt; and by cost, we͛re not just referring to the out of pocket expense (i.e., time, energy, etc.). The time, energy and out of pocket expenses associated with your debt recovery efforts need to be tallied before you proceed. It might behoove you to ignore the relatively smaller amounts and shift your efforts toward the medium to larger debts.
Do you have the proper documentation?
As with all debt recovery efforts, in order for you to have leverage or legally enforce payment of the outstanding debt against the debtor, proper documentation is a must, especially when collecting debt in Mexico. Contracts, invoices, order forms, order confirmations, acknowledgments, any and all correspondence all qualify for proper documentation
Can you find them?
When it comes to successfully collecting debt in Mexico is the ability for a commercial collection agency to contact or even locate your debtor. Do you have up to date information on the company: Company name, including any legal entities, address, phone numbers, etc? Keeping this information current is important whenever you are doing business domestically or internationally as it will aid in the debt recovery process should the need arise.