Legal requirement in out-of-court debt collection

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Related Topics:
  1. Frequently asked questions about pre-court debt collection
  2. Legal requirement in out-of-court debt collection
  3. Late payment damages
  4. Debt collection accounting
Table of contents:
  1. What is a legal requirement in out-of-court debt collection?
  2. Who is allowed to conduct out-of-court debt collection?
  3. When is a claim eligible for debt collection?
  4. What evidence and documentation are required?
  5. What are the legal foundations for out-of-court debt collection?
  6. What information must be provided to the debtor?

For an outstanding claim to be pursued by a debt collection agency, certain legal requirements must be met. Without these prerequisites, the debt collection process would be inadmissible or open to challenge.

The most important foundation: The claim must be valid, meaning the money is actually owed. It must also be clear what the claim is based on, for example, a contract or an invoice.

Timing also plays a role: The claim must be due. Only after the statutory or contractual payment deadline has passed can debt collection begin.

Another key point: The claim must be enforceable under civil law. That means it must not violate any laws and must be able to hold up in court if challenged.

If these requirements are not met, neither the creditor nor a service provider should initiate debt collection.

Who is allowed to conduct out-of-court debt collection?

Not everyone is permitted to collect debts on behalf of others. In Germany, there are strict rules about who is authorized to carry out out-of-court debt collection. In general, there are three types of actors who may do this:

  • The creditor themselves, that is, the person or company to whom the money is owed.

  • A licensed debt collection agency acting on behalf of the creditor.

  • A lawyer, also acting on behalf of the creditor.

All others may only offer debt collection services if they hold an explicit license. This rule is intended to protect debtors from having third parties collect debts unlawfully or unprofessionally.

What are the requirements for debt collection agencies?

Anyone wishing to offer debt collection services professionally must be officially registered under the Legal Services Act (RDG). This registration is only granted if certain conditions are met. These include:

  • Professional qualification: Responsible individuals must demonstrate knowledge of legal fundamentals.

  • Reliability: There must be no serious criminal records or ongoing proceedings.

  • Sound financial standing: Anyone who is insolvent themselves may not collect debts on behalf of others.

The registration is applied for at the relevant supervisory authority. This authority regularly reviews whether the conditions are still being met. Only with this registration are debt collection service providers allowed to collect debts on behalf of others.

Can a creditor collect a debt themselves?

Yes, they can. A creditor is always permitted to collect their own claims, even out of court. No special license is required for this.

However, anyone attempting to collect debts on behalf of others without being registered may be committing a criminal offense. This also applies to so-called “friendly help” within personal networks or among acquaintances.

Those who prefer not to take action themselves, or who want to be on the safe side legally, can hire a debt collection agency or a lawyer.

When is a claim eligible for debt collection?

Not every unpaid invoice can be handed over to a debt collection agency right away. Certain conditions must be met for a claim to be legally pursued out of court.

First, the claim must genuinely exist. In other words, there must be a clear reason why money is owed, such as a purchase, a service, or a contractual agreement. The amount must also be clearly traceable.

In addition, the claim must be due. That means the agreed-upon payment deadline has passed. For example, if an invoice states “payable within 14 days,” debt collection can begin no earlier than on day 15.

It is also important that there are no arrangements in place allowing for later payment. If the creditor and debtor have agreed on a deferred payment (known as a “deferral”), debt collection cannot begin during that time.

When is a claim considered due?

A claim becomes due when the time has come for the payment to be made according to the contract or the law. In most cases, the payment deadline is stated directly on the invoice, for example, “payable within 14 days.” If no specific date is given, the legal rule applies: Under Section 271 of the German Civil Code (BGB), a claim is immediately due once it arises.

Without the claim being due, a reminder cannot be issued and neither can a debt collection agency take action. The due date marks the starting point for all further steps in claims management.

When is the debtor in default?

Default means that a payment is overdue, potentially leading to additional costs. A debtor falls into default when they fail to pay a due claim on time and have received a reminder (Section 286 BGB). Only after this reminder may default interest, reminder fees, or debt collection costs be charged.

There are exceptions, however: If a fixed payment date was agreed upon (e.g., “payable by January 10”), or the debtor has explicitly refused to pay, no reminder is necessary. In these cases, default occurs automatically. The point in time when default begins is important because it determines when additional charges become permissible.

What evidence and documentation are required?

Debt collection can only be carried out lawfully if the claim can be clearly substantiated. This requires specific documentation. These documents serve to demonstrate the amount, origin, and legitimacy of the claim, for both the debt collection agency and the debtor.

The most important documents include:

  • Invoice or contract on which the claim is based

  • Proof of delivery or service documentation, if available

  • Payment reminder or prior warning letter, if already sent

  • Contact and address details of the debtor

  • Power of attorney, if the collection is handled by a third party

Providing complete documentation enables swift and transparent processing. If important evidence is missing, it can lead to delays or follow-up questions.

In Germany, debt collection is governed by several laws. The two most important are the German Civil Code (BGB) and the Legal Services Act (RDG).

The BGB outlines how and when a claim or payment default arises, and what costs may be claimed. The RDG defines who is authorized to offer debt collection services.

Together, these laws ensure legal protection for both creditors and debtors. They form the binding legal framework for out-of-court debt collection.

What provisions does the BGB include?

The BGB contains numerous sections relevant to debt collection. Some key provisions include:

  • Section 286 BGB: Defines when a debtor is considered in default

  • Section 288 BGB: Specifies the permissible rate of default interest

  • Section 280 BGB: States that anyone in default must compensate resulting damages, such as debt collection costs

  • Section 241 BGB: Describes general obligations arising from contractual relationships

These rules apply to all civil law claims—both private and commercial.

What does the RDG require of debt collection service providers?

The Legal Services Act (RDG) is the central law for debt collection agencies. It regulates who may perform out-of-court legal services and under what conditions. Only those listed in the official legal services register may collect debts on behalf of others for commercial purposes.

The RDG also sets out how debt collection services must be carried out. It protects debtors from excessive charges or unlawful practices. At the same time, it ensures that debt collection providers have the necessary qualifications and that their work is subject to regular oversight.

What information must be provided to the debtor?

Debt collection agencies are legally required to provide debtors with full information about the claim being pursued. The goal is transparency and giving the debtor a fair opportunity to review the claim. These obligations are defined in several laws, including the RDG and the debt collection reform legislation.

Required information includes:

  • Name and address of the client (the creditor)

  • Basis and amount of the claim, with a clear breakdown

  • File reference number, if applicable

  • Information on rights and options for objection, especially for consumer claims

  • Contact details for raising questions or objections

This information must be presented clearly and no later than the first letter sent to the debtor. If the details are incomplete or incorrect, the debt collection process may be invalid or contestable