Why are there collection fees/ collection costs?
Collection costs or collection fees - what is the correct term?
The law and case law use the terms collection costs or collection remuneration.
When it comes to the topic of collection fees, it's easy to get bad advice. This is one of the reasons why debt collection agencies suffer from a rather bad reputation. But a closer look shows that the collection remuneration is a completely justified cost.
Have you received mail from a collection agency and perhaps wondered about the additional costs?
First of all, the money for the principal claim is still due to the company for which this amount is still an outstanding invoice item.
And how do you get into debt collection?
- You have ordered something or used a service and then forgotten to pay the bill in the hectic of everyday life.
- Or at the time of purchase, payment was made by EC or credit card, but the account was not funded at that time and collection was not possible.
- Sometimes it can just become too much if you finance several things or forget to cancel subscriptions.
- Or you didn't expect that several things would break at the same time and have to be replaced, and unfortunately your savings just aren't enough.
Most companies usually first send out reminders themselves before it comes to debt collection. After all, they are interested in a good customer relationship!
However, if no payment is received, the further dunning process is often outsourced. Drafting letters, making phone calls, sending e-mails and then possibly even conducting legal proceedings - that is very time-consuming. And this effort has to be paid for. The longer it takes for the debtor to pay, the higher the effort and the corresponding costs.
A debt collection agency is part of the private sector and offers a service to other companies: the collection of outstanding debts. This is an important issue for many companies, as outstanding debts can damage the company's liquidity in the long run and ultimately even lead to insolvency.
Of course, a debt collection agency cannot offer the service of professional collection for free. It has to cover its costs just like any other company in the private sector.
The services include, for example, concluding and monitoring payment agreements or clarifying complaints. This includes all correspondence - in writing and by telephone - with debtors, lawyers and other third parties, such as debt advisory offices or guardians. But investigations are also necessary from time to time in the course of recovery. For example, the addresses of debtors have to be researched if they move without informing the contractual partner of the new address.
Damages caused by delay
The delay damages increase the further the collection procedure escalates. It is therefore also in the debtor's interest to clarify the situation as quickly as possible or to pay the outstanding debt.
The creditor lays out the collection costs and pays the collection service provider he has commissioned. However, he can have the debtor reimburse him for the collection costs incurred. This is provided for by the German Civil Code in §§ 280, 286.
There, it is regulated that the debtor must compensate the creditor for the so-called damage caused by delay. The term damage caused by delay refers to the financial disadvantages that the creditor suffers because the debtor does not pay on time.
Delay damages include, for example, reminder costs, collection costs or default interest. Finally, the costs that arise in the event of a court case are also included.
Collection costs fall under damage caused by delay and are therefore reimbursable. More on the subject of legal services and the costs incurred for them is regulated in the Legal Services Act (Rechtsdienstleistungsgesetz, RDG). It is the general legal situation that collection costs incurred must be reimbursed to the creditor and thus borne by the debtor.