An insight into the Danish debt collection market

The history

With effect from 1 October 1997, the Debt Collection Act came into force to ensure that debt collection activities in Denmark took place under satisfactory conditions. The law was created based on a report on debt collection, which was again drafted by a working group set up in 1994.

The working group consisted of representatives from i.a. The Judges' Association, the Bar Council, the Ministry of Justice and the Danish Debt Collection Association.

The law was supplemented by the executive order of 26 September 1997 and essentially regulates the conditions for debt collection activities. Including the requirements for authorization, security, client liability, processing of money, approval, and contacting the debtor.

The Ministry of Justice has delegated supervisory authority and administration to the National Chief of Police. Based on an inquiry, the National Police has sent an overview showing that at the end of 2004. One hundred authorized debt collection companies registered with the National Police Chief.

The law's requirement for authorization is rough that you must be 25 years of age and be infamous and without debt to the public sector. In addition, the company must provide a reassuring guarantee that the company can comply with the requirements of the law and pay DKK 5,000 for the authorization.

The security must correspond to the company's funds for the customers, but a maximum of DKK 5 million. However, it is up to the company to increase security as needed, and the National Chief of Police does not ensure that this happens. The Chief of the National Police also does not guarantee that the client response rules are complied with.

There are no special requirements for education or experience. However, the holder must be 25 years of age and staff visiting debtors must be unpunished and 18 years of age or older. The law did not lay down rules for the debt collection companies' collection of fees from debtors, but from 2002 all extrajudicial costs were regulated by particular executive order.

With the amendment of the Interest Act and the new debt collection order of 12 July 2002, the Ministry of Justice has chosen to regulate the debt collection steps taken out of court based on an EU directive.

The debt collection market and the agencies

There is a big difference in the individual company's size, competencies, marketing, and products for lawyers and debt collection agencies.

There is fierce competition in the market for out-of-court debt collection, and most agencies have independent sales departments that spend a lot of money on sales and marketing.

Conversely, the fierce competition and the modest debt collection fees/recovery percentages mean that very few people have a more significant profit on the debt collection business.

More and more people, therefore, choose to supplement their services with invoice administration, purchase of distressed receivables and the like, at the same time as customers increasingly have to take out annual subscriptions and pay commissions on the amounts recovered.

When companies practice debt collection

It is uncertain how large a share of the market's total amount of debt collection cases is handled in-house. Still, it is estimated that there will be an increasing amount as companies reach a size that makes it financially profitable to set up internal debt collection departments.

Conversely, the internal debt collection departments often have more difficulty recovering the debt, as debtors do not always take the internal reminders seriously. The cost recovery is higher when using a lawyer or agency. RKI does not have authorization as a debt collection company but has established a special reminder and debt collection service for its more than 12,000 business customers.

Companies can use the RKI Special Reminder as a third reminder to debtors. The special reminder warns the debtor of registration with RKI and debt collection if the creditor does not receive payment or a proposal for an installment plan.

Not all debtors know that registration only takes place in RKI's closed register, where no one other than the current creditor can see the registration. Enrollment in the closed register does not affect the debtor's ability to obtain credit from others. RKI itself believes that more than 50% of debtors pay to avoid being registered with RKI. If the debtor does not pay, RKI can ensure that the claim is forwarded for collection to an RKI link partner or authorized RKI lawyer.

Danish debt collections agencies

Below, we present to you some of the most influential debt collection agencies in Denmark. The agencies work within different markets.

  • AirHelp Denmark ApS, Frederiksberg
  • C AL Finans A/S, København SV
  • Alektum A/S, Aarhus C
  • Alm. Brand PIA A/S, København Ø
  • Astreae IVS, Næstved
  • Euroincasso ApS, Vejle
  • Camden Inkasso ApS, Odder
  • Collectia CMS A/S, Brøndby
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Pub: 28 Mar 2022 09:54 UTC
Views: 55