10 FAQs On No Win No Fee Debt Recovery For Malaysian SMEs

As a Company Secretary dealing with SMEs in Malaysia, MISHU has had a fair amount of dealings with debt recovery, and while no win no fee debt collectors are legitimate solutions, they are not perfect.

Like everything in business, they are tools with advantages, trade offs, and ideal use cases. 

For the benefit of business owners, we’d like to offer independent insights into the ten top questions on ‘no win no fee’ debt recovery services in Malaysia.

Let’s begin!

In case you weren’t aware, here are details on debt recovery limitation periods every creditor must know.

The takeaway: The faster you act, the better your chances of recovery!

Now on to the FAQ.

1. What if you win a no win no fee case?

The debt collection agency or solicitor gets paid, either in the form of a pre-agreed:

• percentage of amount recovered, or
• a flat rate

The remaining funds will be paid to you, minus any additional costs specified in your agreement.

However, winning doesn’t mean you recover everything in one payment–it’s very common for debtors to request clearing their debt in installments.

There’s no guarantee the debtor will honour the arrangement–if you don’t feel like chasing them every time they miss a monthly payment, a debt collector will do it for you.

2. What if you lose a no win no fee case?

Most commonly, you and the solicitor or agency shake hands and go your separate ways.

However, you may still be responsible for other costs, such as court fees or expenses incurred during the case, depending on your agreement.

3. Is there a catch with no win no fee?

Yes–creditors usually pay more for a successful recovery compared to a debt collector working on a flat upfront fee.

We wouldn’t call this a catch, but a tradeoff!

Debt collectors that offer a no win no fee policy take on significant upfront risk–all their efforts might result in zero revenue. In exchange for undertaking this risk, they ask for a higher potential reward.

Basically, if you win, you pay more, but if you lose, you pay nothing.

4. Does no win no fee debt collection apply to unpaid invoices?

Yes–and a debt collector can also advise you on a reasonable overdue invoice interest rate on top of that!

5. Does no win no fee debt collection apply to personal debts?

This doesn’t really apply to business, but yes– a debt collector can track down your friend and make them repay the RM20 borrowed for a pack of cigarettes last Raya!

On a more serious note, as long as the debt is recoverable, debt collectors are usually keen–including business debts, personal debts, and even tenant arrears–see our guide to debt recoverability for details.

6. How much do no win no fee agencies and solicitors charge?

From our own experience and what we’ve been told, percentages range from 30% to as high as 70%; depending on complexity of the case, probability of success, debt amount, and other case-specific factors.

7. Can you lose money on no win no fee?

Typically no, other than an upfront basic fee that you may pay your lawyer/debt collector.

However, keep in mind that when you initiate legal proceedings against a debtor; you may be countersued if there are legitimate grounds for the counterparty to do so.

For example, a contractor suing an employer for unpaid sums may be countersued by the employer for late delivery and unrectified defects.

In addition to that, court litigation involves disbursement expenses, which are not always part of the ‘“’no win, no feen arrangement – clients may have to bear court filing fees and ad-hoc expenses like despatch, courier, stationery, and statutory deposits.

8. What’s the success rate of no win no fee?

Everyone always asks this, but it’s impossible to answer 🙂

All we’ll say is no debt collector will offer a no win no fee option unless they felt confident of success.

Meanwhile, debt collectors operating on a flat upfront fee are much more incentivised to take on every case that comes their way. 

9. Is there a difference between no win no fee debt collection agencies and lawyers?

The biggest difference is the legality and types of methods employed.

As far as we know, there’s no such thing as a debt collection agency license in Malaysia. Most debt collection agencies operate in a legal gray area, while debt recovery is a legitimate area of law solicitors specialise in.

In practice, this means:

• lawyers are strongly incentivised to stick to legal debt recovery methods
• debt collection agencies operate are more likely to use questionable tactics

If your idea of debt collection involves pointy sticks, late night calls, and red paint, don’t ask a lawyer to back you up. However, if things get out of hand, you could face civil or even criminal liability.

10. How can I find the best no win no fee debt collection lawyer or agency?

The same way you’d evaluate any other service provider, which means looking for:

• a proven track record
• positive client reviews
• transparent terms and fee structure

Above all, seek debt collectors that have handled cases specific to your industry–and won them, of course!

Let MISHU help with your business debt recovery

MISHU is partnered with numerous service providers to help us deliver a comprehensive suite of business solutions to SMEs in Malaysia. Let us connect you with the right experts to meet your needs!