Outsourcing collections almost always raises the same concern, and it's a reasonable one: handing over your portfolio also means handing over your customers' data and the way they are spoken to. If that goes wrong, the vendor doesn't pay for the damage. Your brand does.
That's why it pays to understand what a collection agency actually does, how it charges, and—above all—what you are in a position to demand from it.
What it does, in order
A serious firm doesn't start by calling. It starts by looking.
1. It audits the portfolio. Before collecting, it reviews what's there: whether the document backing each obligation exists, where it stands in terms of the statute of limitations, and whether the contact details are any good. Without this step, effort is wasted on cases that can't be collected while the ones that can are left to go cold.
2. It segments. Not every part of the portfolio is worked the same way. Based on the audit, it decides what goes to pre-legal collections, what allows for an agreement with flexible terms, what goes to court and what, honestly, isn't worth pursuing. A call list without criteria is the opposite of a recovery strategy.
3. It locates. In older portfolios, the phone numbers and addresses in the original file are almost never useful. Finding the debtor again and understanding their current situation is part of the job, not a prerequisite you should have to solve.
4. It works in stages. Each delinquency bucket has its own message, channel and contact person. What produces results isn't the volume of contacts but consistency and a shift in tone according to the stage.
5. It documents everything. Every action recorded, with date, channel and outcome. This isn't red tape: it's what backs up an agreement, what allows collection costs to be charged when appropriate, and what protects you if the debtor files a complaint.
6. It goes to court when the time is right. And not before. Most cases are closed out of court, faster and without breaking the business relationship.
What it charges
The standard model in the region is a success fee: the firm charges a percentage of what is actually recovered, and that percentage rises as the portfolio gets older and harder to collect. A 30-day portfolio isn't collected at the same price as one written off five years ago, and it makes sense that way.
There's one point worth being clear about, because it's often misunderstood: the collection agency charges you, not the debtor. In Ecuador there is no rule that allows an outside agent to bill its own fees directly to the debtor. What the debtor may end up paying is the pre-legal collection charge that the creditor is authorized to apply, and that charge is subject to strict rules: the February 2022 amendment to the Organic Consumer Protection Law (Ley Orgánica de Defensa del Consumidor) provides that it applies only to past-due loans that accrue default interest and are not in court proceedings, that it must be stated in the contract, that it applies “exclusively when collection efforts have been made and duly documented,” and that no amount whatsoever may be charged for preventive collection efforts before the due date.
If someone suggests that the debtor should pay the fee, ask them to show you which rule supports it.
What you should demand
This is the part almost nobody negotiates, and the one that protects you most.
That it is qualified, if you are a financial institution
Article 163 of the Organic Monetary and Financial Code (Código Orgánico Monetario y Financiero) expressly lists collections among the auxiliary services of the financial system. This means a regulated institution can't hire just anyone: the provider must be qualified by the relevant supervisory authority. Ask for the qualification, not their word.
That it knows you are liable for its conduct
The current supervisory rule for auxiliary services in the popular and solidarity financial sector says it plainly: auxiliary service companies, “jointly with the contracting institution, are responsible for the conduct of all their employees or agents who interact with members, clients and users.”
Shared liability. If the agent mistreats your customer, the problem is yours too. That's why the contract must include conduct standards, certified training and audit rights.
That it collects within the legal framework for contact
Since the amendment published on February 11, 2022, Article 49 of the Organic Consumer Protection Law (Ley Orgánica de Defensa del Consumidor) regulates collection by phone, text message or email. The framework is clear: one contact per day per channel, Monday through Friday, between 7:00 a.m. and 8:00 p.m., from an identifiable number, and only with the debtor, co-debtors and guarantors.
Ask how each collection action is controlled and audited.
That it treats the data for what it is: a processor
Under the Organic Personal Data Protection Law (Ley Orgánica de Protección de Datos Personales), a collection agency that receives your database is a data processor. Article 34 requires a contract stating that it will process the data only according to your instructions, that it will not use it for other purposes or transfer it, and that “once the contractual service has been performed, the personal data must be destroyed or returned.”
That data processing agreement isn't an optional annex. It's mandatory, and not having one is your risk.
That it gives you traceability, not just results
Periodic reporting with every action recorded, status by case and reason for non-payment. If the only deliverable is how much came in, you aren't outsourcing: you're delegating blindly.
Warning signs that it will go wrong
- They promise a recovery rate before they've seen the portfolio.
- They don't ask about the documents or how old the delinquency is.
- They won't sign a data processing agreement.
- They propose charging the fee to the debtor.
- They don't report on collection activity, only on payments.
How we work at FEXCOB
Our collections outsourcing always starts with auditing and segmenting the portfolio, with our own team in each country and traceability of every action. We have more than twenty years in Ecuador, Colombia and Peru, with more than USD 20 million recovered for the financial system.
And if you're evaluating providers, use the list above with all of them. Including us.
You may also like: what a collections agent can do · selling your portfolio vs. managing it
Legal sources cited: Organic Monetary and Financial Code (Código Orgánico Monetario y Financiero), Article 163; Organic Consumer Protection Law (Ley Orgánica de Defensa del Consumidor), Articles 47 and 49, as amended by the law published in Official Gazette Supplement 1 (Registro Oficial Suplemento 1) of February 11, 2022; Organic Personal Data Protection Law (Ley Orgánica de Protección de Datos Personales), Article 34; Supervisory rule for the qualification and supervision of auxiliary service organizations and companies in the popular and solidarity financial sector (Norma de control para la calificación y supervisión de las organizaciones y compañías de servicios auxiliares del sector financiero popular y solidario), issued by the SEPS (Superintendency of Popular and Solidarity Economy).
This article is for informational purposes only and does not constitute legal advice for any specific case.