In the world of financial services, effective debt collection can make or break an organization’s cash flow. Companies are constantly weighing their options between in-house claims management and outsourcing to external service providers. Recent regulatory changes—especially Estonia’s Credit Servicers and Credit Purchasers Act, which came into force on January 1, 2025—have only added to the complexity.
So, how do you decide which route is the best fit for your business? And how does the new regulatory environment factor in?
1. The Case for Outsourcing: Faster Turnaround, Lower Internal Strain
For many financial services companies, outsourcing offers a clear advantage: speed. External providers, especially those specialized in handling non-performing loans (NPLs), often have established legal processes and the staffing capacity to resolve claims more quickly.
Key benefits of outsourcing:
- Faster Cash Recovery
Even if claims are sold at a discount, companies can recoup revenue within months rather than waiting for lengthy legal proceedings. - Operational Flexibility
Outsourcing reduces the need for large in-house legal teams, lowering overhead costs. - Expertise
Licensed debt servicers know the legal/regulatory ropes—particularly valuable in cross-border or compliance-heavy markets.
That said, outsourcing can mean less direct control over the borrower experience and the eventual recovery rate, not to mention losing a chunk of receivables to fees or discounted sales.
2. The In-House Approach: Control, Customization & Automation
On the other hand, an in-house operation lets you own the entire debt collection journey. Although it requires more resources initially, especially if you’re scaling up, many businesses find it worthwhile—particularly when they harness the right technologies.
Key benefits of managing claims in-house:
- Tailored Workflows and Personalization
If you’d rather guide borrowers through flexible payment plans or maintain a more empathetic communication style, an in-house setup gives you full freedom to customize these interactions. - Enhanced Brand Experience
With the process internal, you maintain a consistent voice throughout. Borrowers often respond more positively when communications come directly from the lender, and you can tweak messaging and tone to reflect your brand values. - Direct Compliance Oversight
Estonia’s updated rules demand transparency and fair treatment of debtors. Having collections in-house can make it simpler to train staff on new regulations, track compliance steps, and quickly implement any changes. - Long-Term Cost Efficiency Through Automation
One of the biggest shifts we’re seeing is the move to document automation or contract lifecycle management tools. These solutions can drastically cut manual tasks—from auto-generating legal statements of claim to ensuring the correct fields are filled for each borrower.some text- For instance, if you process hundreds of claims per month, an automated platform can help your legal team generate ready-to-file documents in a fraction of the time. This can cut down on hiring multiple new staff just to handle paperwork.
- By reducing errors (like typos or missing fields), these systems can also help you avoid legal delays or compliance missteps that drive up costs.
- Data Security and Control
Keeping all borrower data under your own roof can streamline data protection measures and let you customize who accesses which information. This not only supports compliance but also fosters trust if borrowers know their data isn’t shared with third parties.
3. Regulatory Changes and Their Impact
Estonia’s new Credit Servicers and Credit Purchasers Act—effective January 1, 2025—tasked Finantsinspektsioon (the Financial Supervision Authority) with licensing and overseeing firms handling credit-based debts.
- Fewer Licensed Providers
Because of stricter capital requirements and closer oversight, some collection agencies may exit the market, potentially raising the cost of outsourcing. - Greater Transparency
Debt collectors must clearly inform borrowers about total amounts owed, interest, and dispute processes. Whether you’re in-house or outsourcing, these guidelines apply—but when you control the process internally, you can embed compliance checks directly into your workflows. - Pre-Collection Efforts
Lenders should offer workable repayment plans before sending a debt to collections. This aligns naturally with an in-house approach, where you can manage these negotiations and maintain strong borrower relationships.
4. Real-World Examples: Automation Changing the Game
In Estonia’s changing landscape, some lenders handling 200–300 legal claims a month found themselves bogged down by repetitive tasks—drafting statements of claim, verifying data, and sending out notifications. By implementing a document automation platform that auto-fills the correct fields (like loan numbers and outstanding amounts), they slashed the time spent on manual prep and minimized error rates.
- Time Saved: Generating legal documents in minutes rather than hours.
- Reduced Staffing Needs: Instead of hiring multiple additional legal staff, they could reassign the existing team to more complex cases or strategic tasks.
- Improved Compliance: Built-in checklists ensured no crucial detail got overlooked, which helped them stay on the right side of the law.
Such automation can make in-house collection feasible, even for mid-sized lenders that want to handle significant claim volumes without relying on third-party agencies.
5. Step-by-Step: Considering an In-House Setup
If you’re leaning toward in-house (or a hybrid model), here’s a simple framework to get started:
- Audit Current Processes
Figure out your claim volumes, biggest bottlenecks, and any manual tasks that automation could simplify. - Evaluate Tech Solutions
Look at contract lifecycle management or document automation tools to reduce repetitive work. - Assess Resource Gaps
Determine what type of legal or compliance expertise you’ll need in-house—and how much of that can be supported by technology. - Pilot a Small Segment
Before going all-in, try in-house collection for a specific borrower segment and measure outcomes. - Scale and Optimize
If your pilot shows strong ROI, expand gradually, keeping an eye on any new regulations or internal capacity limits.
Financial Trade-Offs: In-House vs. Outsourcing
- Upfront Investment
You may need specialized staff or software. While that can be a bigger initial hit, it might deliver long-term savings if your volume of claims is high. - Ongoing Costs
Outsourcing typically means predictable fees or a percentage of the recovered debt. In-house operations can vary, but automation helps keep these costs more stable. - ROI
Done right, in-house automation often yields a compelling return on investment through labor savings, fewer errors, and an improved borrower experience.
Conclusion
In an evolving regulatory environment—one that now requires licensed credit servicers and heightened transparency—the choice between outsourcing and in-house management has never been more nuanced. While outsourcing still provides a quick, if sometimes pricey, route to debt recovery, taking an in-house approach can offer unmatched control over brand, data, and compliance, especially if you leverage automation to streamline the process.
Ultimately, it’s about finding the balance that best fits your cash flow, operational capacity, and long-term goals—while maintaining a solid footing with new regulations. Whether you build a full-fledged in-house department or adopt a hybrid model, putting smart processes and tools in place can help you maximize recoveries, minimize costs, and stay a step ahead in Estonia’s evolving debt collection landscape.
