Collection without dunning - how is that possible?

Consumers might be surprised to receive a letter from a debt collection service provider without having first received a reminder from the original business partner. Many customers wonder: Collection without dunning - is that even lawful? The answer is: A collection order without a dunning letter for the creditor is possible under certain conditions.

Collection without dunning: When does a collection case apply?

An undisputed and overdue account of the creditor forms the only necessary precondition for commissioning a collection company. This can be based on the delivery of goods or a service contract. If the invoice is due and the customer does not pay, a company can transfer its receivables management to a service provider and commission a debt collection company which will then write a letter to the debtor to inform him/her of the transfer to debt collection.

The normal case: No collection without dunning

Normally, collection companies are only called in after default in payment has occurred. At that point, the debtor has usually already received one or several reminders from the creditor. The first dunning letter can also be called a payment reminder - what is important is that it must be a clear request from the creditor to the debtor to fulfil his payment obligation. Otherwise, it is a payment reminder without legal consequence: a polite reminder letter. In most companies, up to three dunning letters from the creditors are sent out before receivables management is transferred to collection. However, this is not a legal requirement. 

Usually, a collection order is only issued if a debtor does not settle an outstanding account even though at least one dunning letter has been sent out and he/she has not replied to the creditor's letter. The debtor is in default, at the latest, upon  receipt of the first dunning letter. This has various consequences, in particular, with regard to the default damages.

Payment default and collection without a reminder

The debtor can default even without a dunning letter from the creditor. A fixed payment term or a fixed payment period has maybe already been agreed in the invoice or contractual agreement. If the debtor has not made payment by this date or before expiry of this deadline, he/she is in default. This does not require a separate payment reminder by the business partner. As a result, collection without a dunning letter is possible.  

Furthermore, the debtor defaults, at the latest, 30 days after receipt of the invoice. Unless otherwise agreed, this statutory provision applies. In this situation too, collection without a dunning letter from the creditor is possible as of the beginning of the default. However, consumers have to be expressly informed of this fact in the invoice.

Who assumes the costs of collection without a dunning letter?

The question of who assumes the costs is not based on whether a dunning letter was sent by the original business partner before the transfer to collection. Instead the decisive factor is default: Was the debtor already in default at the time at which the collection letter was sent? The default results in the so-called default damages, which the debtor has to reimburse to the creditor. In this context, all financial disadvantages which the creditor incurs because of the debtor's default must be reimbursed by the debtor. This also includes the collection costs - with or without a dunning letter.

What should you do in a case of collection without a dunning letter?

Apart from this, collection without a dunning letter from the creditor corresponds to collection with a dunning letter from the creditor. After the first letter from the collection company, the debtor should first check the claim asserted against him/her. After all, the debtor might have settled the invoice by the time he/he received the letter from the collection company. In this case too, the debtor should not ignore the collection company's request for payment but explain his/her view of the matter via phone, letter or e-mail.

If the account is still open, the debtor should settle is as fast as possible and remit the corresponding amount to the account number specified.