Several laws and guidelines regulate debt collection in Germany.
- Civil Code (BGB): This is the main body of private law in Germany. Debt collection falls under contract law, which is a part of the Civil Code. The code outlines the rights and obligations of creditors and debtors.
- Insolvency Law: If a debtor is unable to pay their debts, insolvency proceedings may be initiated. This is regulated by the Insolvency Code (InsO).
- Legal Services Act (RDG): This law regulates who can provide debt collection services. Debt collectors must be registered and approved under this act.
- Federal Data Protection Act (BDSG): This law restricts the way debt collectors can use personal data of debtors.
- Unfair Competition Law (UWG): This law protects consumers from unfair business practices, including in debt collection.
Debt collectors in Germany are required to follow these laws, which provide certain protections to debtors. For example, debt collectors cannot harass debtors, they must provide clear information about the debt, and they must respect privacy and confidentiality laws. Penalties for non-compliance can include fines and restrictions on operating.
In case of international debt collection cases, EU regulations may also apply, like the European Payment Order procedure, which simplifies the process of cross-border monetary claims. It’s recommended to consult with legal experts for detailed and updated understanding.
Top Collection Agencies in Germany
There are several debt collection agencies in Germany, each with its unique services and customer base.
- Euler Hermes: A major global credit insurance company that also offers collection services.
- Tesch Inkasso Forderungsmanagement GmbH: They provide full-service receivables management from one source, from credit checks to the judicial dunning process and even the monitoring of titles.
- Arvato Financial Solutions: A subsidiary of Bertelsmann, Arvato Financial Solutions offers services that include debt purchase, debt collection, and business information.
- EOS Group: A multinational company offering debt collection among other services.
- Creditreform: A collection agency with a strong presence in Germany that offers a range of services from credit rating to marketing and debt collection services.
- Bisnode Deutschland: A part of Dun & Bradstreet, Bisnode is a leading European Data & Analytics company that offers debt collection services.
- Klarna: While primarily a financial technology company, Klarna provides collection services for debts arising from its payment solutions.
- Intrum Justitia: A Sweden-based collections company with a strong presence across Europe, including Germany.
- LOWELL Group: Offering services across debt management and collections, data analytics and insight, and more.
Things to ask before you hire one:
Always conduct a thorough due diligence process before finalizing your choice to ensure the agency aligns with your business needs and ethical standards. Also ask for their policy on Legal Compliance, Reputation, References and Experience, Fee Structure, Customer Service and Reporting, Technology and Data Security and Client Reviews and Testimonials.
What can debt collectors do in Germany?
Debt collectors have a range of strategies to retrieve owed money, but their actions must comply with German law.
- Contact the Debtor: The debt collection agency will first attempt to contact the debtor, typically by sending a written notice. This letter will outline the debt, including its origin, the total amount owed, any late fees or interest, and a deadline for payment.
- Negotiation: Debt collectors may negotiate with the debtor, possibly offering payment plans or settlements.
- Legal Action: If the debtor doesn’t respond or refuses to pay, the debt collector can initiate legal proceedings. This generally starts with a “Mahnbescheid” (order for payment), which is an official request for payment. If the debtor still does not pay, the creditor may seek a “Vollstreckungsbescheid” (enforcement order), which allows for the seizure of assets or income.
- Seizure of Assets: If the debt is legally confirmed and the debtor still refuses to pay, the debt collector can request a bailiff to seize the debtor’s assets to satisfy the debt. Certain assets, like necessary household goods or a minimum level of income, are protected from seizure under German law.
- Credit Report: Unpaid debts can be reported to the SCHUFA (Germany’s main credit bureau), which can negatively impact the debtor’s credit rating and make it harder to get loans or credit in the future.
- Insolvency Proceedings: In extreme cases, if the debtor is unable to pay the debt, insolvency proceedings may be initiated. This can lead to a variety of outcomes, including debt relief, payment plans, or the liquidation of assets.
Throughout this process, debt collectors must respect the rights and privacy of the debtor. They are not allowed to use threatening or abusive language, disclose the debtor’s situation to third parties without consent, or contact the debtor during unreasonable hours. Penalties for violations of these protections can include fines and restrictions on operating.