Good practice in consumer debt collection

(2014)

General
1.1 Policy and supervision approaches
1.2 Application of the Debt Collection Act and its mandatory requirements
1.3 What is consumer debt?
1.4 The debtor has the right to be informed about his/her debt situation
General principles in debt collection by the creditor or the contracted agent
2.1 Initiation of debt collection process
2.2 Debt collection must not be delayed
2.3 Debt collection must not be combined with sales promotion
2.4 No pressure or threats
2.5 Debt collection must not compromise the debtor’s right to privacy
2.6 Information about the creditor and the stage of debt collection to the debtor
2.7 If the debtor complains about the debt
2.8 Debtor’s right to have voluntary debt collection suspended
2.9 Collection of payments from minors
2.10 Contents, amount and time limits of the creditor’s payment demands
2.11 Voluntary debt adjustment and good debt collection practice
Special features in the debt collection carried out by the contracted agent
3.1 Professional debt collector’s special obligation to act carefully and diligently
3.2 Written payment demand
3.3 Debtor’s protection of payment
3.4 Value added tax in consumer debt collection
3.5 Collection of a debt created abroad
Public organizations’ special role
4.1 Debts for public charges
Collection costs
5.1 No unnecessary costs should be incurred for the debtor
5.2 Maximum debt collection fee amounts
5.3 Debtor’s overall cost liability
Allocation of payments in debt collection
Law enforcement and coercive measures
Compensation for erroneous practice and damage

1. General

1.1 Policy and supervision approaches

The Finnish Consumer Ombudsman oversees debt collection in cases of outstanding consumer debts (section 12 of the Debt Collection Act). The oversight applies to all outstanding consumer debt collection whether it is carried out by a creditor company or a public organization or a contracted agent for the creditor. The supervisory tasks of the Consumer Ombudsman extend, however, beyond those in the Debt Collection Act, and the Consumer Ombudsman must also take into account other considerations and legislation affecting the status of the consumer. In addition to the provisions in the Debt Collection Act, debt collection must observe, among other things, the provisions of Chapter 2 of the Consumer Protection Act concerning practices that are inappropriate or otherwise unfair in customer relationships and, when drawing up contract terms, the provisions of Chapter 3 of the Consumer Protection Act concerning unreasonable contractual terms and, in case of consumer credits, section 13 in Chapter 7 of the Consumer Protection Act concerning obligations of the lender towards the consumer in cases of payment delays. In debt collection, collective protection of consumer debtors is especially necessary, because the creditor selects the debt collection agency, whereas the debtor pays the debt collection expenses.

The terms and conditions of the agreements between consumers and companies must be reasonable. Similarly, it is expected that the transactions of public organizations with citizens be reasonable. This requirement also applies to situations where a breach of contract has occurred. The debtor is responsible for his/her payment delay, but the consequences must not be unreasonable.

This guideline contains the key issues concerning the Consumer Ombudsman’s supervision of collection of outstanding debts from consumers. In addition, the guideline provides concrete advice to businesses and public bodies in order to prevent problems from arising. Ultimately, it is the Market Court that decides about the application and contents of good debt collection practices in consumer debt collection.

Based on the Act on the Authorisations for the Recovery of Debts, the Regional State Administrative Authority of Southwest Finland can give a permission to carry out debt collection activities for a fixed period. That authority can withdraw the authorisation if its holder acts contrary to the Act or good debt collection practices (see the Act on the Authorisations for the Recovery of Debts 517/1999).

The guideline uses normal font to indicate matters based on the Act and on its preparatory work and on the points providing explanation for them.

The Consumer Ombudsman’s views and policy decisions are shown in indented italics in the text.

1.2 Application of the Debt Collection Act and its mandatory requirements

The Debt Collection Act (513/1999) for collecting outstanding debts contains the provisions to regulate the collection of outstanding claims. In the Act, debt collection refers to all actions the purpose of which is to make the debtor voluntarily pay the outstanding debt to the creditor. The Debt Collection Act is not applied for the recovery of outstanding debts through the court or enforcement process. Nor will the Debt Collection Act be applied if other laws have contrary provisions to it (section 1 of the Debt Collection Act).

The outstanding debt can be collected by the original creditor or a contracted agent, for example a debt collection agency.

The Consumer Ombudsman is not authorized to interfere in the procedures at the stage where the outstanding debt is subjected to enforcement either after court proceedings or directly as an enforceable outstanding debt. If, however, voluntary debt collection takes place, one way or another, parallel to the enforcement, the Debt Collection Act will be applied to this part of the recovery process.

There are specific provisions for the collection of payments due to public authorities. These payments include driving licence fees and tax and fine payments. The penalties for payment delays of outstanding consumer debts are also regulated with the consumer credit provisions of Chapter 7 of the Consumer Protection Act and with the provisions of the Electricity Market Act, the Communications Market Act and the Finnish Interest Act. They state the kinds of penalties and schedules that can be applied to the consumer debtor if the outstanding debt is paid late or not paid at all. Besides these, the provisions of the Debt Collection Act are applied where applicable.

The Debt Collection Act is a general law and applies to voluntary debt collection due to also other outstanding claims apart from those related to consumer debts (section 3(2) of the Debt Collection Act).

The Debt Collection Act is mandatory in the interest of the debtor. The debtor cannot be put in a worse position than that specified in the provisions of the Act, even in cases where the debtor has consented to it (section 2 of the Debt Collection Act).

Entrepreneurs must take into account the provisions of the Debt Collection Act, for example those concerning payment reminders, when drawing up agreement conditions.

1.3 What is consumer debt?

According to the Consumer Protection Act, a consumer is a natural person who has acquired consumer goods mainly for the purpose other than for practicing his/her profession. A business, on the other hand, refers to a company, business or self-employed person who, in order to derive income or other economic benefit, markets, sells or offers consumer items in return for remuneration. A consumer good is a good, service or benefit marketed to consumers or acquired for a private household.

The provisions concerning consumer debts are applied to:

business’s claims concerning debts which are based on having provided a consumer with a consumer good or a credit and
claims concerning receivables of a legal person governed by public law or claims related to carrying out a public function when the debtor is a private person (section 3 of the Debt Collection Act).

Typical consumer debts include subscription fees of magazines and other products, phone bills, hire purchase payments for goods, credit card bills, insurance premiums and bank loans. If another party, in addition to the consumer who makes the agreement, is responsible for a consumer debt, the debt is regarded as a consumer debt if the party liable for payment is in the position of a consumer. For example, a payment which is demanded from a private person acting as a guarantor is a consumer debt if the principal debt relationship is classified as such.

As a rule, rent receivable by a private person in the role of a landlord is not a consumer debt, nor is the maintenance fee that a residential housing association collects from the owners of its shares. However, the Debt Collection Act requires that also in these cases good collection practice is complied with. On the other hand, receivables from private tenants of rental municipal housing companies are consumer debts.

1.4 The debtor has the right to be informed about his/her debt situation

The debtor has the right, to get from the creditor or for example the debt collection agency by request up-to-date information about the total sum of and reasons for his/her debts, itemization of unpaid debts and repayments as well as determination of the interests and costs accrued on top of the original debt. This information is cost-free for the debtor. A reasonable reimbursement can be requested for drawing up an itemization or explanation if the time elapsed from the previous one is less than 12 months (section 4 a of the Debt Collection Act).

In addition, the debtor has the right to get information about a possible limitation and limitation cut-off concerning the debt (detailed arguments in section 4 a of HE 21/2004).

No unnecessary inconvenience for the debtor should be brought about. From the viewpoint of the debtor, in respect to clarifying the debt situation and taking corrective actions, it is essential that there is no undue delay in providing the information. The Consumer Ombudsman’s view is that the debt information requested by the debtor must be provided by the creditor or professional debt collector normally within the month at the latest from the presentation of the request.

2. General principles in debt collection by the creditor or the contracted agent

2.1 Initiation of debt collection process

Practices that are contrary to good debt collection practice or are otherwise unfair to the debtor must not be used in debt collection. An outstanding debt that has become obsolete by limitation or otherwise expired must not subjected to debt collection (section 1 (1,3) of the Debt Collection Act).

When a debt collection procedure is initiated, the creditor must ensure that the procedure is justified and that it does not cause unreasonable consequences to the debtor. The debtor is responsible for the payment delay, but the consequences must be proportionate to the delay in question. The creditor should not gain benefit from the debtor’s delay.

Even in situations of payment difficulties, the principal aim should be to see the matter through by agreement and with as little inconvenience as possible. Generally, this means agreeing on a new payment date or creating an entirely new payment schedule.

If an agreement about a new payment period is made, the debtor shouldn’t be sent payment demands based on the original payment schedule.

If the outstanding debt has become obsolete by limitation, expired for another reason or lacks justification, collection must not be attempted. A payment demand or a collection letter alone cannot form a justification for an outstanding debt. The outstanding debt must be based on an earlier debt relationship, obligation or agreement, which must be itemised for the debt collection.

The usual limitation period for a debt is three years from the time when the debt has become due or when the creditor can present a payment demand to the debtor. The general limitation period can be suspended. The general limitation act is always applied unless other laws have contrary provisions to it. Several special laws have their own limitation provisions, and the provisions of these laws about calculations of terms laid down, suspension of limitation and legal effects of limitation differ from the general limitation provisions. These most commonly occur in cases of outstanding debts governed by public law. Apart from debt limitation, the debt may have become obsolete as a result of a confirmed payment program in a debt adjustment for a private person.

2.2 Debt collection must not be delayed

Debt collection must not be unnecessarily lengthened or delayed. If the collection of a debt is not initiated until a prolonged period has elapsed from the due date, problems may arise regarding whether there is a debt relationship and whether the assertion of payment made by the debtor can be verified. In such a case, the creditor must also be prepared, apart from presenting an explanation concerning the justification of the debt relationship, to justify the delay for the debt collection.

2.3 Debt collection must not be combined with sales promotion

The debtor must not be offered, in connection with the debt collection, new goods to be purchased or a new agreement to be made. This kind of practice could be regarded as inappropriate pressure which is directed at the debtor, where the consumer’s position as a debtor is taken advantage of and with which the risk of over-indebtedness of the debtor is increased.

The Consumer Ombudsman asked a collection agency to abandon a practice in which the debtor was offered a new periodic subscription in connection with a collection of a debt due to an outstanding subscription bill. By making a new subscription, the debtor would have become exempted from the debt collection expenses of the outstanding subscription bill. The collection agency gave up the practice (KUV 99/40/2196).

2.4 No pressure or threats

Debt collection should create no unnecessary inconvenience for the debtor (section 4(2)(2) of the Debt Collection Act). For example, phone collection at inconvenient time can give rise to unnecessary inconvenience to the debtor.

The Consumer Ombudsman’s view is that debt collection personally targeting the debtor must not be carried out at least on Sundays or public holidays or during weekdays between 8 pm and 7 am (see the arguments in section 4 of HE 199/1996).

A situation where contacting the creditor or the contracted agent is made difficult for example by having very short and limited customer service times or by making contacting possible for example only by email may be regarded as creating an unnecessary inconvenience to the debtor. Also, contacts should not incur extra payments exceeding the basic price of a normal contact method to the debtor.

2.5 Debt collection must not compromise the debtor’s right to privacy (section 4(2)(3) of the Debt Collection Act).

Debt collection must be tactful, and, for obtaining payment, pressure should not be exerted in ways that complicate the situation of the debtor in an unreasonable manner or are insulting. In evaluating these methods, the generally prevailing values in our society should be used as the measuring stick.

The debtor’s right to privacy must always be respected. Thus, in debt collection, it must always be ensured that the process under way is not revealed to other people regardless of the methods used in the collection and regardless of who is carrying it out. For this reason, attention should be paid to details. In general, notification material used in debt collection must be of a style that is neutral.

Intrusive from the viewpoint of privacy is debt collection in a manner that draws attention, for example by using envelopes with an easily distinguishable printed notice about the letter containing a payment reminder.

It is inappropriate to notify or even to threaten to notify outsiders, such as the debtor’s employer, relatives or others in the debtor’s close circle, about the debtor’s payment default.

If it is deemed necessary to carry out debt collection in other ways than in writing, the protection of the debtor’s privacy must be emphasised.

If for some exceptional and specific reason it is necessary to make a collection visit to the debtor’s home, the provisions about trespassing and privacy protection must be paid special attention. It is clear that the agency’s representative must behave in an appropriate manner. Threatening language must not be used against the debtor or for example the debtor’s family members, nor should there be any threatening behaviour towards them.

Phone collection as such cannot be regarded as inappropriate as long as there is no breach of privacy protection and no unreasonable inconvenience.

To collect an outstanding consumer debt, unaccepted draft must never be used (section 7 of the Debt Collection Act).

2.6 Information about the creditor and the stage of debt collection to the debtor

In outstanding debt collection, one is not permitted give incorrect or misleading information about the consequences of neglecting to pay or about other matters that are important from the viewpoint of the debtor (section 4(2)(1) of the Debt Collection Act).

In debt collection, the debtor must always be explained whether the collection has to do with the creditor’s own collection of debt or with a contracted debt collection. The debtor must also be informed about the stage the outstanding debt collection has reached. Thus the debtor must be notified about whether he/she is dealing with a payment reminder sent by the creditor or a formal payment demand prior to court proceedings sent by a professional debt collector.

If a debt collection agency has been asked to take care of the creditor’s credit management services, this shouldn’t give rise to ambiguity in the debtor’s mind about whether he/she is dealing with the creditor’s invoice, payment reminder or a payment demand from the agency. In the case of a creditor changing or a transfer of an outstanding debt, the party to whom the right for debt collection is transferred will become a new party to the agreement with the debtor. The debtor must be informed about the change of the creditor.

It is against good debt collection practice for a debt collection agency to allow some outsider to use payment demand, invoice or letter forms, carrying the agency’s name or its company name, or other material designed for debt collection. The debtor must not be given a wrong idea about who actually is taking care of the debt collection.

One example of the prohibited use of misleading information is where the creditor – once the debt has become outstanding – starts using, in his communications with the debtor, an auxiliary company name which might make the debtor think that the outstanding debt has been transferred for the collection of a party contracted by the creditor (arguments in section 4 of the Debt Collection Act).

If during the course of debt collection an account is given about the consequences of a failure to pay the debt, it should be accurate. If the creditor transfers an outstanding debt to a contracted agent for collection, the method adapted cannot be called a recovery of a debt by enforcement. It is important that the debtor is also given truthful information about at what stage a payment default entry in the credit history is possible (see HE 199/1996 and the arguments in section 4 of HE 57/2012)

2.7 If the debtor complains about the debt

If the debtor disputes his/her payment obligation and provides a proper justification for it, voluntary collection as defined in the Debt Collection Act cannot be continued with respect to the part disputed until the matter has been clarified. In spite of the contestation by the debtor, the debt collection can nevertheless go ahead if the debtor does not present any justification for the contestation or invokes a justification which clearly has no bearing on the obligation to pay (section 4b (1,2) of the Debt Collection Act).

As far as directly enforceable debt governed by public law (e.g. health centre payment for a municipality) is concerned, a mere well-argumented contestation is not sufficient: suspension of the debt collection requires a material appeal in accordance with the section 9 of the Act on the Collection of Taxes and Fees or that the debtor has used some other comparable legal protection method for the purpose (section 4 b (3) of the Debt Collection Act).

If the debtor has complained about the debt or advised about a social force majeure encountered, the situation must be clarified before continuing with the debt collection. If the debtor disputes his/her payment obligation without presenting a justification, good debt collection practice requires that the debtor is asked about a justification for the contestation. If the debtor appeals only to a justification which clearly has no bearing on the debtor’s payment obligation, good debt collection practice requires that the answer given to the debtor about the challenge concerning the outstanding debt reveals whether the collection of the outstanding debt will be given up or whether it will continue and that there is an explanation about why the reasons presented by him/her have no bearing on the matter.

If the outstanding debt seems unclear and contestable due to the reasons given by the debtor, there is a case for the debt collection to be suspended. The contracted agent must consult the creditor to find out whether there is any justification for continuing the voluntary debt collection or should the matter be brought before the court.

The requirements set for the contestation justifications presented by the debtor cannot be very high. This particularly concerns matters for which the creditor has the burden of evidence, for example when the debtor claims that the agreement or some other grounds which the outstanding debt is claimed to be based on were not created or if the product or service does not correspond to what was agreed upon.

Good debt collection practice requires that the debtor who disputes his/her payment obligation concerning a directly enforceable outstanding debt will be guided to make a material appeal or use another comparable legal protection method if such is available for the debt in question.

Justified objections to a debt collection given before the court, at the Consumer Disputes Board or some other resolving body should always suspend debt collection of the disputed amount.

Once the debtor has disputed his/her payment obligation with appropriate grounds, it is possible for the creditor to refer the contested debt justification to the court to decide or transfer any directly enforceable debt to the process of enforced debt recovery (see the arguments of section 4b of HE 57/2012)

2.8 Debtor’s right to have voluntary debt collection suspended(section 4 c of the Debt Collection Act)

Sometimes it is obvious that voluntary debt collection will not get the results and unjustifiably just increases the recovery costs for the debtor. For situations like this, the debtor of a consumer debt has been provided with a right to ask a suspension of the debt collection to transfer the matter to legal collection. The precondition is that the whole receivable amount has become due.

Once the request has been made, recovery costs can be demanded only for the costs of sending a collection letter deemed necessary from the viewpoint of retaining the rights of the creditor, suspension of limitation for the creditor or informing about a payment default.

The debtor must be informed about this possibility at the latest in the payment demand sent by a professional debt collector (section 5 a of the Debt Collection Act).

2.9 Collection of payments from minors

The legal competence of a minor, that is, someone under 18 years of age, is restricted. A minor can enter into agreements which, in view of the circumstances, are usual and of little significance (section 24 of the Guardianship Services Act). In addition to this, a minor has the right to decide on the proceeds of his/her own work as well as on property given to his/her administration by the guardian (section 25 of the Guardianship Services Act). This right does not, however, extend to signing a debt agreement, even if that debt was meant to be paid by the minor’s own future work income. Even with an express permission by the guardian, the minor cannot enter into debt commitments other than that of the student loan guaranteed by the state (section 34 of the Guardianship Services Act). To take out other loans in the name of a minor requires permission from the guardianship authority. Without such permission, the transaction carried out is not binding on the minor, nor can he/she be subjected to the collection of payments.

A legal action into which a minor does not have the right to enter is not binding on him unless his/her guardian or someone else in a comparable position of trustee has given consent. Once the minor has reached adulthood, he/she will have to pay the debt taken out as a minor without the necessary permit or permission only if he/she consents to it (section 26 of the Guardianship Services Act).

Businesses will carry the risk when an agreement made with a minor turns out to be invalid. Consumer debts that can be collected from a minor him/herself include debts that are based on that a business cannot refuse from entering into agreement with the minor, according to the law. The most common example is that of granting a compulsory traffic insurance to the owner or person having custody of a motor vehicle entered into the vehicle registry. Also debts based on the ownership of a property or occupation and control of a rented flat as well as taxation debts and restitutions for damages can be collected from minors.

As the basis of the guardianship legislation is the clear intention to protect the minor as far as possible from entering into debt, so that at the start of adulthood it would be possible for him/her to start assuming the responsibilities of life without payment default entries.

According to the view of the Consumer Ombudsman, already the starting point in the agreement practice should be that in agreements that require the guardian’s permission it would be understood that the party liable for the payment would be the guardian giving the permission and not the minor using the service. Even when a collection of a debt is based on grounds that directly bind the minor him/herself, the principle of protection of the minor should be paid attention to in a debt recovery. Collection of payments solely from a minor should be exceptional.

As a rule, a minor him/herself can only make cash purchases. The validity of buying via invoicing must be evaluated, proportioning the importance and quality of the agreement to the minor’s age and developmental stage.

Good collection practice requires that in connection with the collection of an outstanding debt the debtor is explained his/her rights. This applies to a situation where the minor has reached adulthood, and the collection begins for a debt for which he/she didn’t have competence.

In 2004, the Consumer Ombudsman provided the guideline “Minors, marketing and purchases“. The guideline is based on the Finnish Market Court’s case law and the Consumer Ombudsman’s decisions.

2.10 Contents, amount and time limits of the creditor’s payment demands

Collection of debts may not result in unreasonable or unnecessary costs or unnecessary inconvenience for the debtor (section 4(2)(2) of the Debt Collection Act). A reasonable time period must be reserved for the debtor to correct his/her failure to pay and to make complaints about the debt (arguments in section 4 of HE 199/1996).

A payment reminder usually is a reminder invoice or some other notification about a certain invoice or other debt still remaining unpaid that has been sent by the creditor. An agent for the creditor can also issue a payment reminder. A creditor’s reminder often is in writing, but it can be issued also in other ways, for example by phone, electronically or via a collection visit.

The time limits of the Debt Collection Act (section 10 b) are there to ensure that the debtor has had enough time for payment arrangements, for paying the invoice or making a possible complaint.

A payment reminder, incurring costs recoverable from the debtor, can be sent in accordance with the 2 x 14 days rule. A normal invoice must be sent 14 days before the due date. The chargeable reminder can be sent after 14 days from the invoice’s due date at the earliest.
If it has been agreed that no separate invoice is to be sent, recovery costs can be claimed for the payment reminder if it is sent after 14 days from the due date at the earliest.
Recovery costs for a payment reminder can be claimed only if at least 14 days has elapsed from the sending of the previous payment reminder.

Even though the creditor can bring an action of performance before the court without preceding voluntary collection practices, good debt collection practice, according to the Consumer Ombudsman, requires that the creditor has sent the debtor at least one payment reminder/notification concerning the outstanding debt before resorting to more severe consequences such as transferring the bill to a contracted agent, suspending a service, making the whole debt due or taking the matter before the court (see also HE 199/1996).

A payment reminder is not in question when information about a debt having become due or about a unpaid debt has been added for example to the next monthly invoice and no separate reminder has been sent to the debtor. In that case, no recovery costs can be charged.

A payment reminder incurring costs for the consumer can be sent also electronically, for example by email or by text message, if this kind of communication mode has been used between the creditor and the debtor (the contractual relationship has been created electronically) or if there is a separate agreement about it.

The creditor or the agent cannot during the course of debt collection unilaterally change the means of communication if, after a reminder has been sent in compliance with the agreed mode, it becomes obvious that the debtor cannot be reached in that manner. It shouldn’t be assumed that the owner of a mobile phone number or an email address would have his/her mobile phone or email always turned on or, in general, the owner of the mobile phone using its text message function, if there is no agreement about it. The debtor’s communications during the course of debt collection can naturally be answered by using the contact information and mode provided by the debtor.

In the Debt Collection Act there are no regulations about the contents of the payment reminder sent by the creditor, but, according to good debt collection practice, it can be expected that the chargeable payment reminder sent to the debtor gives sufficient details for the checking of the payment and legality of the debt, such as:

creditor’s name and address

reason for the debt, invoice details and invoice total,

payment address and date due,nformation about to whom possible complaints about the debt and recovery costs should be presented and within what time. A special mention must be made about a municipality’s specific time-limit for appeal, for example.

To prevent making the debtor’s payment difficulties worse, it would be desirable to inform the debtor also about what will happen if the debt is not paid. If the payment reminder tells about the consequences of a failure to pay the debt, that information must be accurate.

2.11 Voluntary debt adjustment and good debt collection practice

A responsible attitude towards debt adjustments must be taken in debt collection (section 4 of the Debt Collection Act). This applies both to creditors and their agents. The creditor or the agent is not obliged to accept the proposed payment arrangements, but, on the other hand, a systematic refusal of entering into various voluntary arrangements cannot be regarded as appropriate, either. The creditor must always consider, on a case-by-case basis, whether, taken the circumstances into account, the payment arrangement could be regarded as reasonable and aim to, as far as possible, reach an amicable settlement, especially when dealing with a debt secured by the debtor’s dwelling.

In practice, debt adjustments can be divided into extended payment periods or payment plans concerning individual debts and voluntary debt settlements taking into account the debtor’s all debts and economic situation. The Debt Collection Act requires that the creditor and the contracted agent take a responsible attitude towards all payment arrangements proposed by the debtor.

The contents of the arrangements to be agreed on are a matter for negotiation. However, the starting point in all arrangements must be that, based on the information received, the arrangement is implementable considering the debtor’s expected ability to pay. Assessment of the ability to pay must be made based on sufficient information concerning the consumer’s income and other financial circumstances while paying attention to the economic significance of the arrangements.

For the evaluation of the consumer’s ability to pay, the necessary information consists of the consumer’s credit history and, in addition to the amount and basis of income, of his/her expenditure, debts and assets as well as possible guarantor liabilities. In examining the ability to pay, attention should be paid to issues such as employment status that affect the continuity of income and also to issues that will probably lead to significant increase in expenditure. In addition, reasonable action should be taken to try to ensure the veracity of the information provided by the consumer. To verify the income details, the consumer should be asked, depending on the situation, to provide the income or pension certificate (see the arguments in section 4 of HE 57/2012 for responsible attitude and Chapter 7, section 14 of KSL; HE 24/2010).

According to the Customer Ombudsman’s view, the financial consequences of the debt adjustment must nevertheless be taken into account so that the settlement concerning the payment arrangements does not become too difficult for the debtor and the creditor/contracted agent. For example, an extension to the payment schedule or a payment plan in relation to an outstanding invoice which is small in view of the debtor’s financial situation must in principle be possible based on the information given by the debtor and asked from him/her on the phone.

The creditor or the contracted agent must provide the consumer with information and advice to prevent payment problems from arising or becoming more serious and for managing default situations (arguments in section 4 in HE 57/2012; Chapter 7, section 13 of the Consumer Protection Act).

If during the course of debt collection it is found that the debtor needs help in sorting out the overall situation and in the settlement of payment arrangements, he/she should be told about the assisting bodies (for example, financial and debt counselling services) to turn to.

The responsibility to give advice is more emphasized in the case of a professional debt collector, who should know the legislation and systems related to the management of debt relationships and over-indebtedness, than in the case of, for example, a small entrepreneur who cannot be expected to have similar expertise.

Based on Chapter 2, section 14 of KSL (comes into effect on 13th June 2014), a business or a debt collection agency cannot use, in phone transactions, a service for the use of which the consumer is charged fees that exceed the price stipulated in his/her subscription agreement or expenses that exceed the calculated basic price corresponding to the price in the subscription agreement. The Finnish Communications Regulatory Authority publishes the calculated basic price annually. What is decreed in Chapter 2, section 14 of KSL, is not, however, applied to agreements related to a financial service or instrument.

Encouraging the debtor to get into contact to settle a debt issue is a part of good and responsible debt collection practice. Generally, it is the contact made by the debtor that initiates a settlement in debt adjustment. Even if the debtor also had other ways to contact at his/her disposal, from the debtor’s viewpoint the phone often is the best method because the matter can be sorted out at once and the parties will immediately get any additional information required. Good debt collection practice and responsible attitude towards debt adjustment require that no unnecessary expenses are incurred to the debtor and that the phone expenses do not unnecessarily prevent contacting or make the debtor’s economic situation worse. Therefore, the Consumer Ombudsman’s view is that, in the light of good debt collection practice, regardless of the reason for the debt, costs exceeding the basic price of the call in phone transactions should not be claimed especially by a professional collection practice.

When collecting debts governed by public law, it must be taken into account that debt collection in this case is a public function in which the requirements of good administrative practices in accordance with the Administrative Procedure Act must be followed. The Parliamentary Ombudsman has emphasized that advice and service, as referred to in section 8 of the Administrative Procedure Act, cannot be separated. Therefore, having one advisory telephone number or a costless electronic internet service available does not permit making the actual service phone subject to an additional charge. From the viewpoint of the debtor, it is of no importance that the creditor or professional debt collector possibly does not receive even a part of the price of the call when the additional fee goes to the phone company.

3. Special features in the debt collection carried out by the contracted agent

3.1 Professional debt collector’s special obligation to act carefully and diligently

A professional debt collector, such as a debt collection agency, has to pay special attention to the debtor’s rights regardless of the creditor being the customer. A consumer debtor – or creditor even – often does not know the provisions related to voluntary debt collection or enforcement or requirements for recovery by enforcement. For this reason, the contracted agent is expected to show special care and diligence in debt collection.In all communications by the contracted agent, regardless of the means employed, it must be clearly shown:

what outstanding debt the recovery process is related to,
that the contracted agent is authorized to recover the debt,
business name and contact details of the agent.

Already when commissioned, a professional debt collector must confirm those central task-related basic facts that can be clarified in a reasonably painless manner. The contracted agent should, for example, check with the creditor that the creditor itself has reminded the debtor about the debt having become outstanding.

Outstanding debts not compliant with the law or clearly lacking justification must not be taken to debt collection. In principle, however, the contracted agent has the right to trust that the reason for the debt is valid.

The agent must reject collection of debt expired by limitation and also not to claim higher interest on late payment than decreed in the Interest Act.

If the debtor, after having received a payment demand, makes a clear reference to the groundlessness of the debt, it is worth examining the correctness of the debt. A mere claim by the debtor about the groundlessness of the debt is not always sufficient; there must be appropriate and sufficient reasons for that claim (for more details, see p.7; If the debtor complains about the debt).

3.2 Written payment demand

According to the Debt Collection Act, a professional debt collector engaged in the recovery of consumer debt must send the debtor a written payment demand. It can be delivered to the debtor also in some other consistent manner if the debtor, after the debt has become outstanding, has specifically accepted the delivery of notifications concerning the debt in this manner (section 5 of the Debt Collection Act).

No payment demand must be given or sent before the debtor, after the debt has become outstanding, has been reminded about the debt or at least 14 days has elapsed from the presenting or sending a payment reminder (section 5 of the Debt Collection Act).

The payment demand ensures that the debtor is provided with sufficient information to clarify the correctness of the debt and to evaluate his/her own legal position.

A professional debt collector generally cannot claim payment on customer debt in court before a written payment demand compliant with the law has been given or sent and the deadlines for debt payment and presentation of complaints mentioned in it have expired. Without having presented a payment demand, a professional debt collector can claim the payment before the court only if

postponement of court proceedings could bring about disqualification to the creditor or there is some other compelling reason to start the proceedings (e.g. the debtor quite clearly tries to avoid paying the debt), or
the debtor has disputed his/her payment obligation or asked the debt recovery to be suspended and the matter transferred to collection by a legal procedure (section 6 of the Debt Collection Act).

If a proper written payment demand as required by the act has not been given, the debtor is not obliged to reimburse the collection fees unless it is a case of a minor oversight by a professional debt collector (section 10 of the Debt Collection Act).

The payment demand must mention at least:

Creditor’s name and address (section 5 a(1) of the Debt Collection Act).

If the name used for the creditor differs from that in the agreement or other act on which the debt is based, the originally used name must also be provided in the payment demand. Also when collecting a transferred debt the name of the original creditor must be provided (section 5 a(3) of the Debt Collection Act).

The reason for the debt (section 5 a(2) of the Debt Collection Act).

The debt relationship, obligation or agreement on which the debt is based must be detailed sufficiently.

Information on the outstanding debt so that the details of the principal of the debt, interest, late payment interest and collection fees are given. In addition, the total sum of these items must be presented. If the calculation basis for the interest is not mentioned, the debtor must nevertheless be informed that he/she can get, by request, a clarification about how the interest is determined (section 5 a(4)(3) of the Debt Collection Act).

As a general principle, the interest details given should include the interest rate, interest period and the amount of principal on which interest or late payment interest has accrued. Also the amount in euros must be given.

To whom, how and when the debt must be paid (5 a(1)(5) of the Debt Collection Act).
The possibility by the debtor to complain about the amount of the outstanding debt and its basis; to whom (address, email, phone number) and within what time the complaints must be presented.

If the debt to be recovered is a debt to a public organization, a separate notification providing the contact details of the unit or person in charge of the debt collection must be made, thus enabling the debtor direct his complaints concerning the outstanding debt and debt collection.

In the debt collection of directly enforceable debt by public organizations, the payment demand must give information about the legal means available in the recovery of this debt and about the possibility to apply for payment postponement (section 5 a(1)(6,7) of the Debt Collection Act, see also Chapter 2, section 7 of the Provision of Services Act).

The debtor must be informed that the outstanding debt has been transferred from the creditor to the collection of a contracted agent and that the future transactions will take place with the agent.

The demand must mention the contact details of the agent’s customer service unit/person to whom the debtor can make his/her complaints and who can be easily contacted.

According to the view of the Customer Ombudsman, a reasonable period of at least ten days must be allocated to the debtor for carrying out the payment and presenting his/her complaints. The allocation of time is meant to leave at least this 10 days time from the arrival of the payment demand for the debtor to respond – not from the date of the collection letter, that is. Therefore, when setting the date due, the time that it usually takes for mail to arrive and a possible weekend and public holidays intervening between the sending and receiving the letter must be taken into account (see also the detailed arguments in section 4 of HE 199/1996).

If the collection fees demanded are higher than the maximum amounts specified by the Debt Collection Act, a breakdown of the collection fees demanded and the grounds for them must be presented to the debtor. Also, advice must be given to the effect that the fees are higher than the maximum amounts otherwise applied (section 10 a(3) of the Debt Collection Act).
In the course of the debt collection process, the approach towards the debt adjustment to be agreed on with the debtor must be responsible, and the consumer must be provided with information and advice to prevent payment difficulties from arising or deepening (section 4 of the Debt Collection Act and Chapter 7, section 13 of KSL).

Therefore, it makes sense to tell in the payment demand about the possibility of debt adjustment.

The payment demand must mention the consumer debtor’s right to ask a suspension of the debt collection and transfer of the matter to legal collection and explain how to ask for a suspension and what the legal effects of this solicitation are (section 5 a(2) of the Debt Collection Act).

According to the view of the Consumer Ombudsman, if several persons are responsible for the debt and a separate payment demand is sent to each debtor sharing the responsibility, the invoice might easily become paid multiple times. Mix-ups of this kind can be made less frequent if an explanatory test is added to the payment demand about it having been sent to all the debtors with joint responsibility and that the invoices having the same case number should be paid just once.

3.3 Debtor’s protection of payment

A payment paid by the debtor to the creditor’s agent is also valid for the creditor. The debtor has the right to assume that the agent acts within the scope of its authority when making agreements concerning the commission. An agreement between the debtor and the contracted agent about the payment period, payment method and arrangements related to the payment also is binding for the creditor.

Normally, after the matter has been transferred to the contracted agent, the payment is admissible even if the debtor paid the outstanding debt to the creditor and not to the agent. The collection costs already incurred to the creditor due to the agent’s actions can, nevertheless, be claimed from the debtor.

3.4 Value added tax in consumer debt collection

The contracted agent cannot collect, from the debtor, value added tax on the commissioned transaction in case of a consumer debt where the creditor is a business that has the right to deduct, in its own tax return, the value added tax portion included in the collection dues. The maximum collection fee amounts include value added tax in the cases where the tax can be levied for the consumer debtor.

A business whose business activities are subject to value added tax can usually deduct, in its own tax return, the value added tax portion paid to the collection agency. Also municipalities are liable to pay value added tax for their business-like activities. Prohibition on the collection of value added tax also applies to receivables that are related to goods and services provided by a business subject to value added tax and municipalities exempt from value added tax – health centre payments, for example. If the value added tax paid for collection services does not remain as the company’s or municipality’s cost, they cannot collect value added tax as a part of collection costs from the customer debtor (MT 2001/005).

3.5 Collection of a debt created abroad

A professional debt collector registered in Finland can be contracted for collecting a debt created abroad. In voluntary debt collection of a foreign debt, in addition to good collection practice, special features associated with the debt must be paid attention to. The foreign legislative grounds for the debt are often unfamiliar to the debtor and require particular examination. Also language difficulties and travel schedules might have prevented or limited the debtor’s ability to respond on the spot. For this reason, it is important that the debtor’s legal position and legal protection methods available are explained to him/her in the debt collection process.

4. Public organizations’ special role

When a public organization collects its debts from citizens, the approach taken in the collection must be appropriate, tactful and paying attention to at least the same requirements as a business does when collecting debts. The Consumer Ombudsman exercises oversight also over public organizations’ debt collection from private individuals before the enforcement stage is reached.

A municipality, being a public organization, has a distinct responsibility as a creditor because its possibilities to assess the debtor’s situation often are better than those of other creditors. From the perspective of social responsibility, it is important that the municipality considers the debtor’s entire financial burden before increasing the costs to be paid by the debtor.

A special feature, when compared with judicial debt collection under civil law, is that the debts to municipalities are generally directly enforceable and also the collection costs of these receivables are directly enforceable, regardless of whether they are result from the creditor’s debt collection activities or from mandated collection transactions. Since after the amendment of the Debt Collection Act (31/2013) the debtor can be responsible for reimbursement of collection costs only to the creditor, a contracted agent can no longer independently demand the payment for collection costs. The purpose of the amendment is to draw attention to that especially when directly enforceable debts are being collected the creditor bears the responsibility also for the correctness of the collection costs. Following the amendment, such creditor is better able to control the way the collection tasks it has mandated are carried out.

When passing the debt collection to a contracted agent, the municipality must take into account that professional debt collectors do not act with official responsibility. The municipality must therefore adequately supervise the agent’s debt collection practices. The Parliamentary Ombudsman, in his decision 1681/4/97 in 1999, has confirmed this principle. In his decision 1964/4/03 in 2004, he has stated, in addition, that collection agents are carrying out a public function when they recover public payments and, under public law, monetary debts as referred to in section 1 of the Act on the Enforced Collection of Taxes and Charges.

Going ahead with a collection in a situation where the debtor has for example a social force majeure often makes not much sense. Payment agreements and different payment arrangements should be used especially when a municipality is the creditor so that the debtor’s situation wouldn’t become insuperable.

If a part of the debtor’s income is regularly seized, special attention should be paid before launching a separate dept enforcement process in respect to individual debts. It is justifiable to ask whether the debt collection is lengthened unreasonably if, after the municipality’s own attempt to recover the debt outstanding, it is transferred to a contracted agent and still after that to debt enforcement. The costs may have to be paid by the municipality itself, for example as increased income support.

Also minors use the municipality’s services. According to the main guideline, minors should not be allowed to run into debt at that age. The guardian should assume the obligation to pay for legal transactions that require his/her consent. Invoicing of health centre visits and various social services should, already on the basis of maintenance liability, primarily target the guardian of the minor. The minor must, however, have the opportunity to get these services anonymously, that is, without his/her guardian being aware of it.

4.1 Debts for public charges

From the perspective of applying the Debt Collection Act, there are four kinds of outstanding debts governed by public law.

Charges for which the Debt Collection Act is not applied at all Typical of these are taxes, fines and fees for duties performed by the government’s authorities.
Charges for which the Debt Collection Act is applied but which cannot be transferred for the collection of a contracted agent (see section 9 of the Debt Collection Act). Examples of these include parking tickets and public transport inspection fees.
Charges for which the Debt Collection Act is applied and can be transferred for the collection of a contracted agent. Typical examples include customers’ payments to municipalities’ social and health services, payments for elderly care, day care payments and some payments to educational institutes.
The nature of this type of debt is that of private law.

Public charges are generally directly enforceable under a relevant law or statute. However, for example library fees and rent receivables from rental housing unit companies owned by municipalities are not directly enforceable. These charges come under private law by their nature. If the voluntary collection of these debts – by the creditor or the contracted agent – does not succeed, action on the debt has to be demanded in court to get an enforceable judgment.

Insurance companies which are private companies have in some cases the right based on law to collect their debts directly through enforcement.

Municipalities are liable to pay value added tax for their business activities, and they can deduct the value added tax portion from the dues to the collection agency. Therefore, the contracted agent is not permitted to collect the value added tax portion from a customer debtor. This prohibition also applies to the municipality’s receivables from goods and services that are not subject to value added tax, for example health centre payments.

It is the professional debt collector’s responsibility to provide the debtor with a written payment demand. In the collection of enforceable debts, both the creditor and the contracted agent must give the debtor information about the possibility of obtaining postponement for the payments and about the legal means available (a material appeal if the debtor thinks that the debt has been ordered and attributed erroneously). In addition, a notification about the contact details of the unit or person in charge of the debt collection of the public organization must be made, so that the debtor can direct there his/her complaints concerning the outstanding debt or debt collection.

5. Collection costs

The debtor must compensate the creditor for reasonable expenses arising from debt collection. Compensation liability may be based both on the expenses due to the creditor’s own recovery actions and on the expenses incurred by the creditor for having to provide compensation for the contracted agent for carrying out debt collection (section 10(1) of the Debt Collection Act).

The debtor is responsible for compensating debt collection costs only to the creditor of the principal sum. The debt collection agency or other contracted agent thus have no right in their own name to demand compensation for collection costs from the debtor. This applies, regardless of whether the debt is directly enforceable or not.

The collection costs must be the creditor’s real costs. As expenses due to the debt collection carried out by the contracted agent, the debtor can be demanded to pay at most the amount of money that the creditor is obliged to pay for the transaction on the basis of the contract between it and the contracted agent. At the end of the day, the creditor bears the burden of proof to show that it has paid the amount of money that is demanded from the debtor as collection costs or that it is obliged to pay that money (HE 57/2012).

Therefore, if the contracted agent provides a collection service and does not deduct, from its customer, the expenses which it demands from the debtor, the practice is deemed illegal. For example, a payment reminder service outsourced by the creditor to a collection agency cannot demand € 5 for a payment reminder if there is an agreement between the creditor and the collection agency on that the creditor’s cost for a payment reminder sent by the collection agency is € 2.

When evaluating the reasonabless of collection expenses, the amount of the outstanding debt, the amount of work, the appropriate way to carry out the collection task and other matters must be taken into account (section 10(2) of the Debt Collection Act).

The debtor, however, is not obliged to reimburse the collection fees

if the creditor or the contracted agent has acted contrary to good collection practice or
if the creditor or contracted agent has continued debt collection after the issue affecting payment obligation has been disputed on justifiable grounds (for more details, see p.7: If the debtor complains about the debt) or
if the creditor or contracted agent has continued debt collection after the debtor has asked the debt collection process to be suspended and the matter transferred to collection by a legal procedure (for more details, see p.8: Debtor’s right to have voluntary debt collection suspended) or
if the professional debt collector has not provided the debtor with a legal payment demand (for more details, see p.13: Written payment demand), except when the negligence or unacceptability of the creditor’s or the contracted agent’s practice might be regarded as being of little significance (section 10(3) of the Debt Collection Act).

If the costs in the opinion of the consumer are unreasonable or without justification, the consumer can dispute the creditor’s claim related to the justification/amount of the costs, and if the collection concerns a consumer debt, the debtor can submit the dispute over the collection cost to the Consumer Disputes Board.

5.1 No unnecessary costs should be incurred for the debtor

It is contrary to good collection practice to incur unreasonable or unnecessary costs or cause unnecessary inconvenience for the debtor (section 4(2)(2) of the Debt Collection Act).

The demand for reasonableness in the Debt Collection Act should not be circumvented by methods which artificially increase the amount of collection costs. This includes the parcelling of a receivable that is based on the same debt relationship into several distinct receivables at the debt collection stage (for example, differentiating the drafting costs of a payment plan to its own receivable form which is then collected as an independent outstanding debt).

Outstanding debts based on the same agreement or otherwise having the same basis must be dealt with together in debt collection to avoid unnecessary expenses. Even if the debt has become due for several outstanding instalments, the unpaid instalments should, as far as possible, be combined into the same payment demand.

Unnecessary costs caused to the debtor also include costs that are due to the sending of several payment reminders to him/her in short intervals.

Unnecessary costs are also caused when, during the same day, the debtor is sent, with the confirmation of the balance he/she has requested, a separate collection letter related to the same debt. Or, when the debtor asks for up-to-date information about his/her debt situation, he/she is informed about the debt balances with new cost-incurring collection letters.

It can be regarded as unnecessary and unjustifiable increase of collection fees to send a cost-incurring collection letter after the debtor, in relation to the correctness of the basis for the receivable, has made complaints the examination of which would have been justifiable before starting or continuing the collection. The debtor is not liable to pay costs which are caused by the collection activities aiming at voluntary debt payment by the debtor and which are initiated when the matter is still pending at court.

A responsible attitude towards payment arrangements must be taken in debt collection. It could be regarded as incurring unnecessary costs if the costs for making a payment plan are collected from the debtor when the creditor or the contracted agent makes the payment plan while being aware that the conditions for the success of the payment plan do not exist. For example, this is the case when the debtor has no possibility to pay the instalments according to the plan, the ability to pay having gone as a result of the payments being destined to cover other enforced debt collection of which the debt collector is aware (see the section: Voluntary debt adjustment and good debt collection practice, p.10).

Costs that result from collection activities that have been undertaken without checking whether the debtor already had paid the debt may be regarded as unnecessary costs. Sometimes the debtor pays the debt late but around the time the creditor or the contracted collection agent is sending the payment demand. The debtor’s compensation liability for the collection procedure in these situations depends on whether the creditor or the contracted agent before the arrival of the payment had time to carry out collection activities that are within the scope of the debtor’s cost liability.

In letter collection, the collection procedure is normally carried out on the day preceding the sending of the collection letter. Sections 47 and 49 of the Payment Services Act (290/2010)) concerning payment transfers require that the payer’s bank transfer the payment to the payee’s bank on the next working day following the payment transaction and the payee’s bank transfer the payment to the payee’s account immediately upon receiving it. If the debtor pays it during a weekend, the transaction day for that payment will be the following weekday (Monday), and the payer’s bank must transfer the payment to the payee’s bank during the next day (Tuesday) at the latest.

Therefore, when we evaluate the debtor’s cost liability in relation to the collection procedure and the debtor’s payment, our premise is that the payment information on the outstanding debt for the collecting party should arrive, at the latest, on the next weekday following the payment. Thus, according to the Consumer Ombudsman’s view, collection activities incurring costs to the consumer cannot be carried out anymore from the weekday following the day of the arrival of information about the payment having been made.

5.2 Maximum debt collection fee amounts

In addition to the requirement for reasonableness, upper limits have been set for the amount of collection fees. Reasonable collection costs should not be thought of as costs based on the same formulas as the upper limits set by law.

Collection of costs requires that the time limits for the collection procedure in accordance with the Debt Collection Act have been complied with – Collection costs for a payment reminder sent by the creditor can be demanded if at least 14 days before the debt becoming due an invoice or some other notification about the debt falling due was sent to the debtor and at least 14 days has elapsed from the due date – or, if the debt has to be paid on a certain day according to an agreement, when at least 14 days has elapsed from the date due (section 10 b(1) of the Debt Collection Act).

Recovery costs for a new payment reminder or payment demand sent by a professional debt collector can be claimed only if at least 14 days has elapsed from the sending of the previous payment reminder or demand (section 10 b(2) of the Debt Collection Act).

When collecting a consumer debt, at most the following amounts can be claimed from the debtor for the recovery actions (section 10 a of the Debt Collection Act).

For creditor’s written payment reminder, 5 euros

Payment reminders by phone or by electronic means also belong to the scope of the debtor’s cost liability. For these measures, the debtor can be requested to pay at most the average costs generated by the reminder method.

According to the Consumer Ombudsman’s view, a payment reminder within the scope of the debtor’s cost liability can be sent electronically if this kind of communication mode has been used between the creditor and the debtor (the contractual relationship has been created electronically) or if there is a separate agreement about it.

The recovery costs claimed from the debtor for the first payment demand by a professional debt collector can, at most, amount to:

€ 14 if the principal sum of the debt does not exceed € 100 or if the debt is directly enforceable (for example, a health centre payment for a municipality).
€ 24 if the principal sum of the debt is more than € 100 and does not exceed € 1 000
€ 50 if the principal sum of the debt is more than € 1 000

For the second payment demand, the creditor can claim at most a half of the maximum amount of the charges for the first payment demand.

A collection agent belonging to the same financial entity with the creditor can claim at most € 5 for a payment demand in the collection of debts due to it.

If the creditor, by the debtor’s request, for example changes the due date in the payment reminder, the creditor or the contracted agent can levy a charge of at most € 5 if the time for the repayment of a debt due is lengthened by at least 14 days by the request.

For a payment plan, in a written or electronically storable form for the whole of the remaining debt, that is created jointly by the creditor or a professional collection agency with the debtor, the demand for recovery costs can at most amount to:

€ 20 if the principal sum of the debt does not exceed € 100 or if the payment plan consists of at most 4 instalments or if the debt is directly enforceable.
€ 30 if the principal sum of the debt is more than € 100 but not exceeding € 1 000 and the payment plan consists of more than 4 instalments.
€ 50 if the principal sum of the debt is more than € 1 000 and the payment plan consists of more than 4 instalments.

Normally, recovery costs for the same consumer debt can be claimed at most for two payment demands and at most for two payment plans. Costs can be claimed for more than two payment demands or payment plans only if there has been a special reason for sending them and the collection measures carried out cannot be regarded as unreasonable, particularly when keeping the principal sum of the debt in mind. In that case, the debtor must be presented with an itemization of the recovery activities and the reasons given for the special motive for those activities (section 10 c of the Debt Collection Act).

If the debt is directly enforceable or the principal sum is below € 100, nevertheless only one chargeable payment plan can be made (section 10 c of the Debt Collection Act).

As far as payment plans are concerned, the maximum cost is meant to cover, among other things, all the costs for measures related to the payment plan. These measures include credit history check, explanation of the terms and conditions of the payment to the debtor, written or electronic confirmation, sending of letters concerning part payments, plan implementation follow-ups and payments to the creditor’s account. The maximum cost is meant to cover also usual and minimal changes to the plan, including postponement of an instalment or lengthening of the overall payment period. If the payment plan is substantially changed, the action can be regarded as equivalent to creating a new payment plan on which a separate charge can be levied (see the detailed arguments of section 10 a of HE 57/2012).

There may be a special reason for sending more than two payment demands, for example when:

the debt has become due in several instalments, and it has not been possible to put all these instalments together into the same payment demand.
the debtor has made the debt recovery more difficult by giving untrue or misleading information.
several parties share the same debt, and each of them must be sent an individual payment demand.
the debtor hasn’t complied with the payment plan, and it is appropriate to inform the debtor about the expiry of the plan and the transfer of the matter to judicial recovery process. As a precondition it is required that the payment plan has from the very start been realistic, taking into account what the professional debt collector has known about the debtor’s anticipated ability to pay and what the overall debt situation is.
sending of a payment demand is necessary to preserve the creditor’s right for example to prevent debt limitation (see the detailed arguments in section 10 c of HE 57/2012).

The maximum collection fee amounts also include the portion of value added tax in the cases where the tax can be levied for the consumer debtor (HE 21/2004 and MT 2001/005).

5.3 Debtor’s overall cost liability

In a voluntary collection of the same consumer debt, the debtor can be levied a collection cost charge amounting at most to (section 10 d of the Debt Collection Act):

€ 60 if the principal sum of the debt does not exceed € 100
€ 120 if the principal sum of the debt is more than € 100 but not exceeding € 1 000
€ 210 if the principal sum of the debt is more than € 1 000

For the collection of a directly enforceable debt, at most € 51 can be demanded as a recovery cost.

The maximum collection cost amounts are undisputable in case of directly enforceable debts. As far as other debts are concerned, the debtor can be demanded to pay the real collection costs exceeding these amounts if the collection has been exceptionally difficult and if the collection measures carried out cannot be regarded as unreasonable, taking into account the principal sum of the debt especially. In that case, a breakdown must be given of the collection fees demanded and the reasons why the costs exceed the maximum amount of the overall cost liability otherwise applied must be given as well to the debtor (section 10 d(2) of the Debt Collection Act).

The expression “same debt” refers to outstanding debts based on the same agreement or resulting from the same basic reason. This generally applies also when the debt has become due in several instalments. If for example payments based on the same long-term contract, such as a rent agreement, are in arrears for many subsequent months, the recovery process will be dealing with the “same” debt. The matter can, however, be reassessed if for example the rents based on that rent agreement have in some occasions been wholly paid and a debt collection process concerning a new rent instalment that is overdue is launched later on (detailed arguments in section 10 c of HE 57/2012).

6. Allocation of payments in debt collection

Assets accrued in debt collection should first be allocated to the interest and only after that to the principal.

In a recovery of a consumer debt, the accrued assets may be allocated to the costs of recovery and their interest only after the debt and its interest have been paid (section 11 a of the Debt Collection Act).

According to the view of the Consumer Ombudsman, in the case of debts becoming overdue in several instalments (e.g. rent, electricity, phone) assets can be allocated to debt collection costs after all the instalments that are overdue or are just becoming overdue have been paid. In other words, if some collection costs for the previous instalments remain unpaid and the consumer is paying the next due instalment, the payment must first be allocated to the new instalment becoming due and only after that to collection costs.

According to the entry into force provision of the amendment (18.1.2013/31) of the Debt Collection Act, this allocation rule is applied to assets that have accrued after the 16th of December 2013.

7. Law enforcement and coercive measures

The Consumer Ombudsman, as a rule, tries to find a negotiated solution if a business or public organization does not follow the provisions of the Debt Collection Act. If necessary, the Consumer Ombudsman initiates the coercive measures that are required in the matter or takes it before the Market Court.

A creditor or a contracted agent who acts contrary to good debt collection practices or a contracted agent who does not comply with the Debt Collection Act concerning the written payment demand to be given to the debtor can be prohibited from continuing that kind of practice or from repeating it or a practice comparable to it. If found necessary, the prohibition can also be applied to a person at the service of the business. The prohibition, which the Consumer Ombudsman can order or provisionally impose, must be strengthened with periodic penalty payments unless this turns out to be unnecessary for some reason.

The Consumer Ombudsman may order a prohibition and strengthen it with periodic penalty payments in issues that are not significant for the interpretation of the law or otherwise significant. No appeal by means of complaint is possible against the decision of the Consumer Ombudsman. The party subjected to the prohibition can take the matter before the Market Court within 30 days of having been informed about it. Otherwise the decision will become permanent. The penalty payment set to strengthen the prohibition is ordered by the sentence of the Market Court. In an urgent matter, the Consumer Ombudsman can order a prohibition also on a provisional basis (section 14 of the Debt Collection Act, section 10 of the Act on the Finnish Competition Authority).

8. Compensation for erroneous practice and damage

The professional debt collector and the creditor carrying out debt recovery are responsible for damage that results from the contracted agent’s illegal or other erroneous practice.

The creditor is responsible for both the contracted agent’s and its own erroneous practice, and the person sustaining the damage can choose from whom he/she will claim compensation. Liability for compensation does not require that the error is wilful or due to neglect. It is sufficient that the practice be erroneous and that it has incurred financial costs to the subject of debt collection (section 15 of the Debt Collection Act).

Typically, compensation could be claimed for costs incurred to the debtor about a clarification of an insufficient, ambiguous or baseless payment demand concerning, for example, the use of phone or provision of receipts.

The contracted agent might have to compensate the costs incurred by the debtor from debt litigation when the agent has not provided the debtor with a written payment demand. Liability for compensation might also arise when the contracted agent has demanded the outstanding debt in court before having given the payment demand and the date due and the period for remarks mentioned in it have ended.

Apart from the debtor, also others, for example a person being subjected to unjustified debt collection, can demand compensation for the damage sustained.

The creditor or the professional debt collector must return the excess payment made by the debtor without incurring costs to him/her if the payment has resulted from the creditor’s or professional debt collector’s error.

A creditor who has had to pay error compensation due to erroneous practice by the contracted agent has the right to be reimbursed by the contracted agent for the compensation paid.

Breaching good debt collection practice wilfully or in a grossly negligent manner is also subject to criminal law (see section 17 of the Debt Collection Act). For example unjustified threatening with a payment default entry can trigger a criminal law process (see HE 199/1996).

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