A Foreigner’s Guide To International Debt Collection In Malaysia

For overseas creditors pursuing cross-border debt collection in Malaysia, engaging a local service provider is almost always necessary, which raises the question:

How do you find a trustworthy debt collector in Malaysia from across the world?

On top of not recovering a debt, the wrong choice risks reputational damage and even legal exposure depending on methods employed by the debt collector.

‘Allegedly’ employed.

To help, our guide provides an overview of what one should know to effectively pursue international debt collection in Malaysia as a creditor in another country.

Here’s how we’ve broken it down:

• basics on Malaysian debt recovery laws and procedures

• choosing between a debt recovery agency and lawyer

• what to look for in a Malaysian debt recovery service provider, and

• how effective debt recovery specialists evaluate potential clients 

Let’s begin.

Essentials on Malaysian debt recovery laws

The good news is debt recovery laws in Malaysia are relatively straightforward and apply equally to cross-border cases (foreigner suing a Malaysian entity), and here’s a quick look at what you need to know:

• Malaysia’s Limitation Act 1953 gives creditors six years to recover a debt

• the six year limitation period starts from the date of when payment is due

• if a debtor acknowledges a debt / makes partial payment, the six-years resets

• enforcement of a Court Judgement against a debtor is six years by default

• the courts may extend a judgement by another six years with justification

• if a creditor allows the limitation period to expire, legal recovery is not possible

Our guide to debt recovery laws in Malaysia covers this at length, but the main takeaway is that the sooner creditors take action, the better the chances of debt recovery.

If your debt is within the limitation period, the next decision is whether to engage a debt collection agency or a debt recovery lawyer.

Debt recovery agency vs debt recovery lawyer

Many creditors assume debt recovery agencies and lawyers in Malaysia are the same, but there are two key differences.

Letters of Demand vs payment reminders

While agencies without lawyers can only send layman payment reminders, licensed solicitors issue Letters of Demand (LODs) that can be used to escalate legal action, making it more likely to prompt debtors to take action.

Regulation and oversight

As of 2025, Malaysia still has no specific license for debt collection agencies, and they largely operate in a legal gray area without bona fide regulatory oversight. There have been many tales of shady agencies absconding with clients’ monies or imposing unexpected hidden fees.

Debt recovery lawyers, on the other hand, are governed by the Malaysian Bar Council and risk losing their license if they breach strict standards.

Practical differences

In practice, lawyers usually stick to compliant recovery processes, while agencies are more likely to use ‘by any means’ tactics, and a creditor’s choice depends on how much they value legal compliance.

That said, both types of providers can be assessed with the same evaluation criteria.

Debt recovery specialist evaluation criteria

Competence and trustworthiness are two qualities that define any effective service provider. The challenge is determining this before hiring one and discovering they lack both!

In debt recovery, three factors reveal the most (in order of importance):

• fee structure

• track record, and

• responsiveness

How a provider measures up in these areas will raise or lower chances of success.

Factor	What to Look For	Red Flag
Fee structure	Works on a success or ‘no recovery, no fee’ basis	Demands high upfront fees before any work is done
Track record	Has documented success rates, case studies, or references	No demonstrable history of success, cannot provide references
Responsiveness	Replies promptly and explains processes clearly	Poor communication, vague or evasive explanations

We recommend foreign creditors be uncompromising on these points, so if a provider fails in any one area, it’s best to move on.

In reality, creditors will likely end up with a list of providers who meet all three factors, at which point they can choose the one with the best combination of: 

• a competitive success-based fee

• similar (and successful) past cases, and

• clear and professional communication

However, remember that the best service providers don't take on every case, especially not under a no-win, no-fee arrangement.

Establish debt recoverability for your case

Debt collection agencies and lawyers naturally prefer straightforward cases where the debtor:

• is not bankrupt or insolvent

• has the means to pay, and

• has no legally credible defence for not paying

If a creditor can demonstrate them to a reasonable degree, the chances of getting taken on under a success-based fee goes up significantly.

What a typical debt recovery process looks like

Cases where debt recoverability is established are usually resolved without going to court, though legal action is sometimes needed if debtors delay or contest the debt.

Step 1: Case assessment - The provider reviews whether the debt is valid, enforceable, still within the limitation period, and whether the debtor has the means to pay.

Step 2: Payment reminder or Letter of Demand (LOD) - Agencies can only send reminders, while lawyers can issue an LOD with legal weight.

Step 3: Negotiation - If the debtor responds, negotiations usually lead to full or partial settlement, or an installment plan. The provider follows up to ensure payments are honored.

Step 4: Litigation - If negotiations fail and the debt is substantial (e.g. RM100,000+) and the debtor has clear means to pay, a lawsuit may be worth considering in order to obtain a court judgment. Smaller claims can still be filed in the Magistrate’s or Sessions Court.

Step 5: Enforcement - If the debtor still refuses to pay, judgment can be enforced through garnishee proceedings, asset seizure and sale, or winding up / bankruptcy actions.

Be warned: Pursuing a debt through Malaysian courts can take years, cost hundreds of thousands, and is usually reserved for creditors with strong, substantial claims and a reliable lawyer by their side.

That’s all from us, and we wish readers a smooth debt recovery process.

Let Rule & Co handle your international debt collection

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Rule & Co is a debt recovery law firm that routinely helps overseas creditors recover debts in Malaysia. As a licensed member of the Malaysian Bar, we employ proven legal strategies that maximise recovery while protecting your reputation. Contact us today for a confidential case assessment.