Debt Collection in Vietnam: Legal Restrictions and Practical Solutions

In the fast-evolving business landscape of Vietnam, credit has become an indispensable tool for growth. However, alongside the opportunities it brings, businesses face significant risks, especially when payments are delayed or debts still need to be paid.

While the demand for effective debt recovery solutions is high, debt collection services have been officially banned in Vietnam since January 1st, 2021, under Article 6 of the Investment Law 2020. This has left many businesses grappling with the challenge of recovering debts while navigating a complex legal framework.

Non-payment risks can affect businesses across all sectors, from SMEs to multinational corporations. Without proper credit risk management and mitigation strategies, companies face potential losses that can jeopardize their operations and financial stability.

The Business Risks of Unpaid Debts

Unpaid debts are more than just financial losses; they can create a ripple effect of instability across an organization. Delayed payments disrupt cash flow, making it harder for businesses to meet their own financial obligations, such as paying suppliers, employees, or investing in growth. Over time, these risks can erode trust, damage partnerships, and even lead to insolvency.

In Vietnam, the challenges are compounded by the absence of debt collection agencies, leaving businesses with limited options to recover their money. Many creditors turn to law firms for legal recovery, but these solutions are often costlyand time-consuming, adding another layer of risk to an already precarious situation. Additionally, navigating Vietnam’s legal system can be daunting for businesses unfamiliar with its intricacies.

These risks are not isolated incidents; they happen everywhere and across all industries. Companies that fail to implement robust risk mitigation measures often find themselves vulnerable to recurring losses.

The Importance of Risk Mitigation and Credit Checks

To combat the growing challenges of unpaid debts, businesses must prioritize risk mitigation strategies from the outset. One of the most effective ways to reduce risk is by conducting credit checks on potential clients or partners before entering into agreements. Credit checks provide crucial insights into the financial health, payment behavior, and reliability of a company, allowing businesses to make informed decisions.

Risk mitigation doesn’t stop at initial due diligence. Businesses should continuously monitor their partners’ financial performance and payment behavior to identify potential issues early. Proactive measures such as drafting clear contracts, setting realistic payment terms, and including dispute resolution clauses can also help reduce the likelihood of disputes or delays.

When businesses fail to mitigate risks effectively, they are more likely to encounter long recovery timelines, legal complexities, and reputational damage. This is why risk mitigation is not just a financial safeguard—it’s a cornerstone of sustainable business growth.

Practical Solutions for Debt Recovery

While the ban on debt collection services limits specific options, businesses in Vietnam still have several legal and practical solutions for recovering debts. These include:

• Negotiation: Direct discussions with debtors to agree on repayment plans.
• Mediation and Arbitration: Alternative dispute resolution mechanisms that are faster and less confrontational than litigation.
• Civil Lawsuits: Filing a case with the People’s Court to obtain a binding judgment.
• Enforcement of Collateral: Recovering debts by leveraging secured assets under legally binding agreements.

Each of these methods has its advantages, but they also require time, effort, and expertise. For many businesses, the lack of knowledge about legal procedures or the high costs of litigation can be significant barriers.

Vanguard Business Information LLC

In an environment where business risks are pervasive, VBI stands as a trusted partner for companies seeking to minimize risks and make informed decisions. Vanguard provides credit checks, company reports, and risk assessments, empowering businesses to identify and mitigate risks before they escalate.

Our comprehensive Company Reports offer a deep understanding of a company’s financial health, creditworthiness, and market reputation. By leveraging this information, businesses can evaluate potential clients, partners, or suppliers with confidence, reducing the likelihood of unpaid debts and disputes.

For creditors facing challenges in recovering debts, Vanguard also provides strategic guidance tailored to the unique regulatory environment of Vietnam. We help businesses explore legal recovery options, navigate complex procedures, and adopt proactive measures to safeguard their financial interests.

In addition, Vanguard offers monitoring services that keep businesses updated on changes in their partners’ or clients’ financial status. This real-time information enables companies to respond quickly to potential risks, ensuring long-term stability and growth.

Why Choose VBI ?

1. Local Expertise: With a deep understanding of the Vietnamese market, Vanguard is uniquely positioned to provide insights and solutions tailored to the local business environment.
2. Comprehensive Data: Our reports include detailed financial analyses, payment histories, and legal compliance checks, giving you a complete picture of your partners and clients.
3. Trusted Support: Vanguard prioritizes client satisfaction, offering personalized services that address your specific needs and challenges.
4. Proven Track Record: As the leading financial information provider in Vietnam, Vanguard has helped countless businesses mitigate risks and recover debts effectively.

Conclusion

Business risks related to unpaid debts are an inevitable part of the modern economy, but they don’t have to derail your operations. By implementing robust risk mitigation strategies, conducting thorough credit checks, and leveraging expert guidance from VBI, businesses in Vietnam can protect themselves from financial instability and focus on sustainable growth.

While the ban on debt collection services adds a layer of complexity, creditors still have legal options for recovering debts, from negotiation to litigation. The key is to act proactively and seek expert support when needed.

With VBI, by your side, you can navigate the challenges of debt recovery with confidence, mitigate risks effectively, and build a strong foundation for long-term success. Visit vnbis.com to learn more about our services and how we can support your business.