Notes on debt collection

Have you received a reminder from a debt collection agency? If so, there are a few questions you should consider.

Is the debt collection company a legal one?

A debt collection company must be entered on the legal services register in order to carry out their work. Debt collection is a legal service which must be registered with the relevant district court. Customers can view the registration here.

What does it mean to be a member of the BDIU (Federal Association of German Debt Collection Companies)?

Membership of the BDIU indicates conscientious, proper and honest professional debt collection qualifications, as the association monitors the practices of its around 560 members and ensures responsible behaviour. A list of members can be viewed here.

What are the collection costs and who pays PAIR Finance?

The amount of the collection costs is the amount of the collection fee that the client who has commissioned PAIR Finance to collect the debt must pay.

PAIR Finance charges its clients a fee for its services. In Germany, for example, this corresponds to the remuneration to which a lawyer would be entitled for this activity in accordance with the provisions of the German Lawyers’ Fees Act (RVG).

The client is also only entitled to reimbursement of the debt collection costs from the debtor in this amount – due to the late payment that has not yet been made (default). PAIR Finance asserts the claim for reimbursement on behalf of the client against the debtor of the claim. The client is not yet obliged to pay the fee when PAIR Finance is commissioned.

Only after PAIR Finance has made every effort to obtain payment for the client in accordance with the contract is the client obliged to settle the claim. According to the law, the client is permitted to assign the claim for reimbursement in the amount of the collection costs to PAIR Finance as compensation for its efforts instead of payment (so-called assignment in lieu of performance).

What should I look out for on the reminder letter?

Reputable debt collection companies will specify the name of the client clearly within the letter, as well as the reason for the letter and the subject and date of the outstanding debt. There should also be clear reference numbers and contact options for the debtor. It is worth noting that this kind of letter can also be via e-mail or text.

Is the company based in Germany?

Transfers to foreign accounts (which can easily be recognised based on the first two letters of the IBAN number) are unusual and customers should be wary. What the digital debt collection companies are now offering is a settlement of the debt via a digital link in a customised payment page or a debtor portal. This is provided as a service for the defaulting customer to allow the outstanding bill to be paid quickly, conveniently and with no changes in media format. Of course, the outstanding debt should always be verified before paying.

What fees can a debt collection company charge?

Debt collection companies are legal service providers and are subject to the law on the remuneration of solicitors (Lawyer Remuneration Act – RVG). They can only charge for their services within the framework of the RVG. The fees are clearly defined by law. Excessive debt collection fees indicate a disreputable company.