For people who have trouble paying credit card debt, who do not pay, or who pay late, the concepts of legal collection and administrative collection are not unfamiliar.
So, what are legal collection and administrative collection?
After a statement is issued on a customer's card, a customer who makes a payment lower than the minimum payment amount, or who makes no payment at all, enters administrative collection toward the end of the second statement period. (Banks typically begin the administrative collection process on day 61 of delinquency.) A notice is sent to customers who enter administrative collection. The notice functions as a warning letter and informs the customer that payment must be made.
If a customer who has entered administrative collection pays off the debt, they are automatically removed from administrative collection and the card is reactivated for use.
To avoid entering administrative collection, it is enough to pay at least the minimum payment amount shown on the statement. In this case, interest/penalty charges continue to accrue on the unpaid balance, but the card does not enter the administrative collection or legal collection process.
If a customer in administrative collection fails to pay the debt, the legal collection process begins on day 91.
For a person who enters legal collection, court proceedings begin. Banks may also initiate seizure proceedings against the debt.
People who enter legal collection are placed on a blacklist. They cannot make use of banking products for 5 years. In addition, all costs incurred during the legal collection process are charged to the debtor. If no payment is made during the legal collection process, enforcement proceedings are carried out.
During the legal collection stage, banks generally offer customers debt restructuring or installment plans. This allows the customer to pay off the debt in installments they can afford, reducing the risk of an adverse process such as enforcement proceedings beginning.
To avoid entering administrative or legal collection, spend with your income in mind regardless of your card limit. Otherwise, administrative or legal collection will become unavoidable.
As our ancestors used to say: “Stretch your legs only as far as your blanket reaches...”
