Improved consumer protection in debt collection law

A legislative draft approved by the Bundestag is intended to make debt collection more consumer-friendly. The core of the legislative draft provides for adjustments to the business and settlement fee in favour of the debtor. Furthermore, the consumer is to be informed about the legal consequences of his actions through greater transparency, e.g. in the case of payment agreements. The law is to come into force on 01.10.2021 at the earliest.

In detail, it is planned:

1. the lowering of collection fees

The smaller the amount of the claim, the higher the fees currently are in relation to it. These are namely set by a fee framework. Claims up to 500 euros are on a value scale and usually trigger a business fee of 1.0 or 1.3. This currently leads to collection fees of €45 or €58.50.
The new draft law now provides for a fee cap for uncontested claims. The maximum fee will be 0.9 and will be reduced to 0.5 if the debtor has already paid on first demand. In addition, an intermediate value level is to be introduced for claims up to 50 euros, for which – provided they are uncontested – a maximum fee of 30 euros can be claimed.

2. New regulations regarding settlement fees

If the debt collection service provider or the commissioned lawyer agrees on payment arrangements with the debtors, such as a deferral or payment by instalments, a settlement fee according to RVG, No. 1000, is also due in addition to the business fee. In this case, the value in dispute is currently set at 20% of the amount of the claim. A fee of 1.5 is then added to this, which results in € 67.50 for claims of value level 1 (up to € 500).
The new legislative draft now provides for a reduction of this amount, especially for small claims. This is to be achieved by a percentage increase in the value of the object of 50% instead of 20%, on which, however, only a fee of 0.7 will be charged. The current € 67.50 will thus become only € 31.50 in value level 1.

3. Equal fees for debt collection agencies and lawyers

In judicial dunning proceedings, the fees of debt collection agencies have so far been limited to € 25 due to § 4 para. 4 p. 2 RDG, while lawyers can continue to charge higher fees according to RVG. Section 4, paragraph 4, sentence 2 RDG is now to be abolished, so that there will no longer be a difference in fees.

4. Debtor pays costs only once even in case of double assignment

In cases where creditors instruct debt collection agencies and lawyers at the same time, both can currently claim their fees from the debtor. However, the legislative draft now provides for a change in this regard: In future, the debtor will only have to pay the fees that he would have had to pay if the lawyer had been instructed individually. This shall only not apply if the debtor disputes the claim only after the debt collection agency has been involved and this is the reason for hiring the lawyer (§13c RDG-E).

5. New duties to inform

Before the lawyer or the debt collection agency can make a payment agreement legally binding, the lawyer must in future inform the debtor about the associated costs, i.e. in particular the settlement fee (Section 13a (3) RDG-E, Section 43d (3) BRAO-E). If the payment agreement is combined with a so-called acknowledgement of debt, the debtor must in future also be informed about which parts of the claim are covered by the acknowledgement of debt and which typical defences/objections can then no longer be asserted (Section 13a (4) RDG-E, Section 43d (3) BRAO-E).

6. Stricter rules for debt collection service providers

Anyone who is not a lawyer but nevertheless wishes to act as a debt collection service provider must in future register as such after a suitability and reliability check (§10 RDG-E). The law is also to determine when suitability/reliability is to be denied as a rule (§12 RDG-E). In addition, the control rights of the competent supervisory authorities vis-à-vis debt collection service providers will be strengthened (§13e RDG-E).

7. Increased protection against identity theft

If the debtor’s current address must first be determined by the debt collection service provider, there is a risk of confusion. In order to better protect potential victims in the future, a note should be sent to the debtor in the first demand letter in these cases. On the one hand, the debtor should be informed that an address has been determined and on the other hand, he should be shown what legal options exist if he is actually the victim of confusion (Section 13e, paragraph 1, no. 7 RDG-E, Section 43d, paragraph 1, no. 7 BRAO-E).

What happens next?

The federal government still wants to examine whether supervision of debt collection service providers can be centralised and possibly supplement the draft law even further. In addition, the effect of the amendment should be discussed again two years after its entry into force and its effectiveness reviewed.
The amendment is already being criticised in many ways. The Greens, the Left and the AFD believe that consumer protection still does not go far enough and needs to be tightened further. The Federal Association of German Debt Collection Agencies (Bundesverband Deutscher Inkasso-Unternehmen) and the Free Democratic Party (FDP), on the other hand, criticise the starting point of the amendment. It is fatal for the payment morale and the economy that obstructive debtors are now also favoured.

We will be happy to advise you on this topic and answer any questions you may have.