Collections - Lawyer's Advantage

Nobody really noticed that starting April 2010 the latest changes in the Federal Act on Data Protection (BDSG) has brought significant changes and limitations to collection issues. These changes mainly concern forwarding data to credit information services.


Any collection offer requires preparation, which means they must have information on the financial standing of the debtor. Now the forwarding of such information from a provider to credit information services has been restricted. Pursuant to the new §28a BDSG, passing on information is only then permitted when:

1. the claim has been acknowledged by court (via unappealable judgment or judgment preliminarily subject to execution) or by other legal instruments that entitle execution,

2. the claim has been successfully acknowledged in a bankruptcy proceedings (§178 InsO),

3. the debtor has expressly acknowledged his debt,

a) the debtor has at least twice been reminded in writing to pay after the claim had matured,
b) the period between the first reminder and forwarding to the service is at least four weeks,
c) the creditor instructs the debtor in a timely manner before forwarding but at the earliest after the first reminder on the planned passing on of the information of a "bad debt" to such agency,
d) the debtor has not contested his debt,

5. the contract has been extraordinarily terminated due arrearages and the debtor has been informed on the intended data transfer.


In practice, this means that collections can only start after the second reminder and two months. When seen in even more detail, you can only start to enforce payment three months after invoicing. This can result in interest loss and greater difficulties, when the claims are older.

The advantage for attorneys is this that they do not count as institutes collecting data to determine creditworthiness. The Federal Commissioner for Data Protection describes credit information services as private companies that collect personal details and sell such information to other companies. The company for credit industry and most known is SCHUFA (Schutzgemeinschaft für allgemeine Kreditsicherung) Following its own reports, this company has 440 million details on 65 million individuals. In other words, practically every German adult is registered in this company's database. There are also several other ones and the biggest in this industry are: Bürgel Wirtschaftsinformationen GmbH & Co. KG, CEG Creditreform Consumer GmbH, arvato infoscore GmbH, Deltavista GmbH and accumio finance services GmbH. Lawyers, are already per definition, not a credit information service. So what relevance does this have for you as a creditor? While you are waiting to be able to report the bad credit to such agency, you can already hire your lawyer to start collecting the open accounts. N.B. some of the credit information companies (especially Bürgel, Creditreform) are also collection agencies. In contrast to lawyers, they may not immediately start collecting.

Practical Hint

When you want to keep a high credit score as long as possible just simply contest the claim and the transferring of data is temporarily prohibited.

Practical Explanation

What's the difference between a collection agency and a lawyer when it comes to collecting open accounts? Since collection issues are legal consultation, such company will need a special permission to so act. Legal consultation is the typical task of an attorney. When it comes to pursuing payment in court, collection agencies are typically a "toothless tiger" because they may not fight in court for claims of third persons. And when it does come to court, then your damages on account of default payment can either be counted from the "collection agency" or a "lawyer". Both are not possible because you have the responsibility to keep your damages as reasonably low as possible. (§254 BGB).


Additional information