Amended Debt Collection Act improves consumer position

The Consumer Ombudsman is satisfied with amendments to the Debt Collection Act, which will enter into force on 16 March 2013. The amended Act will reduce collection fees charged to debtors and allow the Consumer Ombudsman to address collection problems more effectively.

In a working group examining amendment of the Debt Collection Act, the Consumer Ombudsman drew attention to certain flaws encountered in the oversight of collection agency practices. Entering into force on 16 March 2013, the amended Act offers several improvements to the consumer’s position.

The most important reform is that collection fees are now more reasonable. Creditors may still charge a collection fee of no more than 5 euros for payment demands sent after the due date. When a matter is transferred from the creditor to a professional collection agency, the debtor may be charged no more than 14 euros for a written payment demand involving debts of no more than 100 euros, 24 euros involving debts of 100-1,000 euros, and 50 euros involving debts over 1,000 euros.

Collection agencies have also unjustifiably increased the amount of the collection fees to be paid by the debtor by sending numerous payment demands, even to persons whose debts are already in enforcement proceedings and who have a payment default entry in their credit history. In the future, a collection agency may, as a rule, send no more than two payment demands. Furthermore, a consumer may prevent the accumulation of unnecessary collection fees by requesting that the collection agency cancel fee-based voluntary payment of the debt, so that the creditor can bring the case before a court of law. The request must be made in writing or in an electronically saveable form.

The amendment also addresses the situation, in which the creditor and collection agency are part of the same parent company or have the same owner. In cases such as this, collection agencies have charged consumers the maximum expense compensation intended for independent professional debt collectors. In the future, any debt collector belonging to the same parent company as the creditor may charge the debtor no more than 5 euros for each written payment demand.

The Debt Collection Act also enhances the ability of the Consumer Ombudsman to deal with illegal debt collection practices. The Consumer Ombudsman can prohibit an enterprise from collecting debts that are in violation of good practices and enforce the prohibition with a conditional fine. Until now, enterprises have been able to simply state their opposition to a prohibition, thus voiding it. In the future, however, enterprises must apply to the Market Court to void a prohibition.