Debt collection

Whenever the creditor commissions a third party to collect the claim after a debtor fails to meet a legitimate claim, it is called debt collection. There are two basic types of debt collection.

Debt collection – sale of receivable

The creditor may delegate debt collection by selling his claim to a collection agency. A declaration of assignment is signed to assign all rights to the claim to the collection agency. In return, a part of the original claim is paid immediately. The agency then assumes the risk that the claim may not or only partially be recovered. From now on the new owner operates the collection. The collection agency collects the outstanding amount from the debtor and acts on its own account. The collection agency generates an income through fees and expenses it may charge the debtor and through the collection of the claim.

Debt collection - on behalf of the creditor

Alternatively, the creditor may hire a collection agency to process the collection for him, maintaining the ownership of the claim. The collection agency collects the entire claim and charges fees. These fees and other expenses will be imposed on the debtor. This finances the collection agency.

Payment providers use collection by direct debit

In principle, collection services are charged by direct debit. If there is no cover or if the account holder objects, a return debit note will be issued. The payment service provider must have the return debit collected by a collection agency or a law firm. For payment providers, collection by direct debit, including collection for a discount of between six and ten percent, is usual. The discount refers to the amount cleared. This also includes all costs for the return debit notes up to the second reminder letter. The judicial dunning procedure, however, does not belong to the scope of services of a payment provider and must therefore be strained by the online retailer itself.