The debt collector knocking on the door is a nightmare that we thought we had consigned to the past. However, with personal debt mounting as people struggle to cope with pay cuts and redundancies, the business of debt collection is thriving. Unfortunately, a lack of regulation is leaving consumers at the mercy of a minority of unscrupulous operators unafraid to use unfair and intimidating methods to recover a debt.

Having operated quietly for the past decade, the debt collection business came into sharp focus earlier this year when it emerged that notorious Dublin criminal, Martin 'The Viper' Foley, had set himself up as a debt collector. One businessman felt so intimidated by the Viper's reputation that gardaí were forced to give him security advice.

It is probably fair to say the incident represented the very sharpest end of the debt collection industry, and there are reputable firms out there working on behalf of some of the country's biggest banks and businesses. Many of those would welcome a regulated system, according to Declan Flood, CEO of the Irish Institute of Credit Management, which represents 12 of Ireland's 50 or so debt collection agencies.

"The purpose of legislature is to protect people when they are vulnerable and people are never more vulnerable than when they are in debt. That is why we would call in the strongest possible terms for the government to legislate. There has to be some element of integrity in business applied to the whole debt function as well," he says.

The Money Advice and Budgeting Service (MABS) has been calling for the regulation of the industry for several years, since clients began reporting that debt collection agencies were becoming more aggressive with debtors and using methods that might be considered unethical. It is not uncommon for debtors to receive letters that have all the appearance of official court documents, for instance, even though these letters are merely warnings to pay up. Debtors have also reported collectors looking for details of not only their own income but that of anyone in the house, and of deceitful practices being used to get in contact in the first place. MABS spokesman Michael Culloty says the need for regulation is now more pressing than ever as debt in default increases and more companies resort to selling debts at a knock-down price rather than wasting resources chasing payment themselves.

"We need leadership on this. We feel that more and more agencies are going to enter this space. The very extreme of it can be illustrated by the Viper down in Carlow – that is the really nasty side of it – but there is a huge increase in the amount of debt out there so I suspect there will be a huge increase in the number of debt collection agencies," he says.

Most European countries have best practice guidelines to ensure that debtors are treated fairly by debt collectors.

The Office of Fair Trading in the UK, for instance, issued extensive guidelines which take a very strong line against the harassment of debtors, limiting the number and frequency of calls that can be made by the collection agency and preventing any attempt to pressure the debtor to borrow more to repay the debt or to embarrass the debtor publicly (all correspondence must be handled discreetly).

By contrast, debt collectors in Ireland require no authorisation or licence to go about their business.

A spokeswoman for the Financial Regulator said legislation is required before it or any other body can regulate the industry. However, there is some protection in place where a debt collection agency has been hired by a regulated firm. In that case, the debt collection agency is obliged to comply with the Consumer Protection Code. Under the principles of the code, the collection agency must act honestly, fairly and professionally and act with due skill, care and diligence in the best interests of its customers as well as preserve the consumer's rights. The code also prohibits personal visits or oral communications except in specified circumstances. However, this protection is not in place where the debt is sold on to an agency.

It almost goes without saying that you should never let matters reach this stage in the first place. Calling in the debt collector is the method of last resort for any reasonable financial institution or company when it is trying to retrieve a debt, not least because it costs them money. By engaging with your creditor when a problem arises, you can save yourself a lot of worry and hardship by negotiating a way through the financial quagmire.

"Running and hiding is the action that will provoke debt collectors and escalate it to that level. While it can be necessary to go down that road it is not the way that most people want to do business," says Flood.

Businesses are entitled to seek payment for goods or services rendered and not paying them essentially means using them as a source of free credit. As well as the need to maintain cash flow in these credit-poor times, businesses also know that the longer a debt is left unpaid, the more difficult it will be to recover. Hence they turn to a debt collection agency.

Even when a debt collector gets involved, there is a legal process which can result in the debtor appearing in Stubbs Gazette or trade journals, which can affect credit ratings, orders to seize the debtor's assets or to register the debt as a mortgage against their property, or an instalment order which, if not met, clears the way for a committal order for prison.

Many companies are now asking the courts to make judgements attached directly to the debtor's earnings as an alternative to committal, says Liam Kelly, manager of the litigation and debt recovery unit at Deirdre K Ryan Solicitors.

"This is a viable and pro-active solution as an alternative to committal and would be useful for defaulters who had means but were not prepared to pay or reach an agreement, as opposed to customers who were simply unable to pay at the moment. Obviously, it is important to stress that legal action is a last resort to recover bad debts and it is preferable to exhaust all other reasonable means of non-legal recovery before considering it," he says.