Collection rights and laws for companies and consumers

Collection is defined as the professional recovery of outstanding accounts in the name of third parties. These activities are carried out under the applicable legal provisions. Against this backdrop, the article below outlines the most important guidelines and collection rights.

Preconditions under collection legislation

Any activity as a collection company requires registration under the German Legal Services Act (RDG). The individual German federal states sometimes have different provisions on who can issue such a permit and which collection rights apply. In many cases, local or regional courts issue the collection permit. In principle, collection company staff must be trained regarding the relevant laws, have an impeccable curriculum vitae and be financially secure.  

The collection rights for companies start with commissioning of the service provider. Receivables that are not settled by the debtor may expressly be forwarded to collection companies by companies. This concerns outstanding accounts on which the debtor has defaulted. Payment default can be initiated by a reminder. Alternatively, the payment may not have been made during the period agreed. The collection rights of a company do not depend on the prior submission of three dunning letters. A company is entitled to commission a collection service provider after an account has become overdue.

Collection rights during collection

Collection rights also concern the period during collection. As of commissioning by the creditor, the collection company becomes the debtor's first point of contact. The debtor should address inquiries to the collection company during this period. Payments which the debtor makes to settle the account are to be paid to the collection service provider. The rights and obligations are clear: The collection process can only be completed once the full account has been settled.

If a company accepts a collection order, the order is first submitted to an examination of whether the conclusions based on the facts are warranted. An obviously unfounded claim is not collected by respectable collection companies. If the debtor receives a payment request explaining the account in accordance with section 11a RDG, he/she should review the individual items and contact the collection company if there are any open questions. The collection company will then sort out these questions with the creditor.

Collection rights regarding default damages

Important collection rights concern default damages as provided for in sections 280 and 286 of the German Civil Code (BGB). According to these, the default damage has to be refunded by the creditor. Any financial disadvantage incurred by a creditor as a result of collection and delay payment have to be repaid by the debtor. In a ruling from July 2005, the German Federal Court confirmed that these costs have to be reimbursed. This means the debtor has to pay the collection costs.

Collection rights and costs

All Collection Agencies have the right to be paid. Section 4 sub-section 5 RDGEG applies to the amount of the collection costs. According to this, the amount of the collection cost is limited to the amount which would have been incurred if a lawyer had been commissioned to carry out the same work. Based on section 13 RVG in conjunction with no. 2300 VV RVG, collection costs are assessed at 1.3 times the comparable fee (threshold fee). The so-called threshold fee is charged for cases which are not complex and difficult. In general, an obligation to minimise the damages applies to the collection of outstanding accounts. As a result, the creditor or its service provider needs to keep the damages reasonably low for the debtor.

Collection rights during court dunning proceedings

In Germany, collection companies are entitled to obtain default summonses and enforcement orders. This provision took effect upon the revision of the German Legal Services Act (RDG) on 1st July 2008. prior to that, court measures were reserved for lawyers. As before, in court dunning proceedings, Paigo GmbH still operates together with competent law firms.