Why are there collection costs?

First of all, a letter from a collection company is annoying for consumers. Many cannot understand why they have to bear collection costs in addition to the principal claim. However, the fact that collection costs are incurred can be explained quite simply: A collection agency is a private company offering a service. This service costs money, since a private company has to cover the costs of its operations.

Why does the debtor have to pay the collection costs?

Some consumers might object that the service provided by the collection company should be paid by the party using the service. As a matter of fact, the company commissioning a collection service provider usually pays the service provider and remits the collection costs initially. However, the creditor is entitled to have the damage caused by the payment default reimbursed by the debtor. Legally, the German Civil Code (BGB) provides for the option to compensate the default damage in sections 280 and 286. 

In the framework of the so-called legal costs, this default damage also includes the collection costs. Therefore, the debtor ultimately has to defray the collection costs. In addition, the debtor is also charged all other costs incurred during the debt recovery process, in addition to the collection costs. This is in line with standard case law and is also readily recognised as an accessory claim, e.g. in the framework of the default summons.

How are collection costs calculated?

Like most respectable collection companies, Paigo GmbH, the Arvato Financial Solutions collection company, also uses the lawyers' compensation ordinance (Lawyers' Remuneration Act (RVG)), as the basis for calculating the collection costs. In this context, the amount of the collection costs is based on section 4 sub-section 5 RDGEG (Introductory Law to the Legal Services Act).

The collection company itself incurs costs during the debt recovery process, e.g. as a result of attempts to contact the debtor in writing and over the phone, the legal review of the facts of the matter, or further investigations. A debtor is not always reached under the address indicated. As a result, costs are incurred to find him/her. These expenses (investigation costs) are not covered by the collection costs.

If you have questions regarding the collection costs, you can contact Paigo GmbH via phone or e-mail. Please use the contact data shown in the request for payment sent to you. Moreover, you can also register in our portal and directly retrieve information on the claims asserted against you online. When paying your debts, please remember to remit the total amount demanded, including costs incurred, rather than the principal claim only.