Good practice in consumer debt collection

Contents

1. General
   1.1 Policy and supervision approaches
   1.2 Application of the Debt Collection Act and its mandatory requirements
   1.3 What is a consumer debt?
   1.4 The debtor has the right to be informed about his/her debt situation
2. General principles in debt collection by the creditor or the contracted agent
   2.1 Initiation of debt collection process
   2.2 Debt collection must not be delayed
   2.3 Debt collection must not be combined with sales promotion
   2.4 Debt collection may not cause unnecessary harm
   2.5 Debt collection must not compromise the debtor’s right to privacy
   2.6 Factors relevant to the debtor
   2.7 If the debtor denies his/her payment obligation
   2.8 Debtor’s right to have voluntary debt collection suspended
   2.9 Collection of debts from minors
   2.10 Contents, amount and time limits of payment reminders
   2.11 Voluntary debt adjustment and good debt collection practice
3. Special features in the debt collection carried out by the contracted agent
   3.1 Professional debt collector’s special obligation to act carefully and diligently
   3.2 Payment demand
   3.2.1 Delivery method of a payment demand
   3.2.2 Delivery of a payment demand
   3.2.3 Content of a payment demand
   3.3 Debtor’s protection of payment
   3.4 Value added tax in consumer debt collection
   3.5 Collection of a debt created abroad
4. Public organisations’ special role
   4.1 Public law receivables
5. Recovery costs
   5.1 No unnecessary costs should be incurred for the debtor
   5.2 Maximum debt collection cost amounts
   5.3 Debtor’s overall cost liability
6. Allocation of payments in debt collection
   6.1 Allocation of assets accrued in debt collection
   6.2 Consumer’s overpayment
7. Law enforcement and coercive measures
8. Compensation for erroneous practice and damage

1. General

1.1 Policy and supervision approaches

The Finnish Consumer Ombudsman oversees debt collection in cases of outstanding consumer debts (section 12 of the Debt Collection Act). The oversight applies to all outstanding consumer debt collection whether it is carried out by a creditor company or a public organisation or a contracted agent for the creditor.

The supervisory tasks of the Consumer Ombudsman extend beyond those in the Debt Collection Act, and the Consumer Ombudsman must also take into account other considerations and legislation affecting the status of the consumer. In addition to the provisions in the Debt Collection Act, debt collection must observe, among other things, the provisions of Chapter 2 of the Consumer Protection Act concerning practices that are inappropriate or otherwise unfair in customer relationships and, when drawing up contract terms, the provisions of Chapter 3 of the Consumer Protection Act concerning unreasonable contractual terms and, in case of consumer credits, section 13 in Chapter 7 of the Consumer Protection Act concerning obligations of the lender towards the consumer in cases of payment delays.

The terms and conditions of the agreements between consumers and companies must be reasonable. Similarly, it is expected that the actions of bodies governed by public law towards citizens are reasonable. This requirement also applies to situations where a breach of contract has occurred. The debtor is responsible for his/her payment delay, but the consequences must not be unreasonable. In debt collection, the collective protection of consumer debtors is necessary, because the debtor is subject to debt collection and is responsible for paying the creditor for the debt collection expenses, but the creditor selects the debt collection agency, for instance.

Section 4 of the Debt Collection Act issues provisions on good debt collection practice. The general clause contained by the statute is intended to cover any forms of inappropriate pressure and improper practices (HE 199/1996 vp, p. 11). Good debt collection practice is a flexible and open norm that complements other regulation concerning debt collection. Good debt collection practice enables intervening in inappropriate activities as new practices are adopted as well as taking into consideration changes in the values prevailing in society without a need to change basic regulation (HE 199/1996 vp, p. 7).

These guidelines contain the key issues concerning the Consumer Ombudsman’s supervision of the collection of outstanding debts from consumers. The guidelines include the Consumer Ombudsman’s positions on interpreting the requirements set by good debt collection practice in the collection of outstanding debts from consumers. In addition, the guidelines provide concrete advice to businesses and public bodies in order to prevent problems from arising. Ultimately, it is the court of law that decides about the application of the Debt Collection Act, including the contents of good debt collection practices in consumer debt collection.

The Consumer Ombudsman’s views and policy decisions are shown in indented italics and marked (CO) in the text.

Under the Act on the Registration of Debt Collectors, the Regional State Administrative Agency for Southern Finland shall keep a register of debt collectors engaged in debt collection on account of another party or collection of their own receivables in cases where it is apparent that the receivables have been received solely for the purpose of debt collection. The Regional State Administrative Agency for Southern Finland has also laid out questions related to following good debt collection practice in its supervisory task. The decision summaries of the Regional State Administrative Agency for Southern Finland referred to in the guidelines are available on the Regional State Administrative Agency’s website. The Parliamentary Ombudsman has also issued decisions related to debt collection in official activities and the performance of public duties.

The views presented in the court decisions and decisions made by other authorities highlighted in these guidelines correspond to the Consumer Ombudsman’s view of the requirements set by good debt collection practice.

1.2 Application of the Debt Collection Act and its mandatory requirements

The Debt Collection Act contains provisions to regulate the collection of outstanding debts. In the Act, debt collection refers to all measures the purpose of which is to make the debtor voluntarily pay the outstanding debt to the creditor (section 1 of the Debt Collection Act).

When drawing up contract terms, the provisions laid down in the Debt Collection Act on issues such as the costs of payment reminders must be taken into account. Penalties for payment delays of outstanding consumer debts are also regulated in the consumer credit provisions of Chapter 7 of the Consumer Protection Act and in the provisions of the Electricity Market Act, the Act on Electronic Communications Services and the Finnish Interest Act. They state the kinds of penalties and schedules that can be applied to the consumer debtor if the outstanding debt is paid late or not paid at all. Besides these, the provisions of the Debt Collection Act are applied where applicable.

The outstanding debt can be collected by the creditor or a contracted agent, for example, a debt collection agency.

The Debt Collection Act is mandatory in the interest of the debtor. The debtor cannot be put in a worse position than that specified in the provisions of the Act, even in cases where the debtor has consented to it (section 2 of the Debt Collection Act).

The provisions of the Debt Collection Act concerning consumer debts also apply to the collection of a receivable of a legal person governed by public law or a receivable related to the performance of a public duty from a private person. (section 3 (3) of the Debt Collection Act).

The Debt Collection Act is not applied to

• claiming payment of debt in court
• the activities of the enforcement authority
• if otherwise provided in other law (section 1 of the Debt Collection Act). There are specific provisions for the collection of payments due to public authorities, including the recovery of driving licence fees and tax and fine payments.

If voluntary debt collection takes place parallel to judicial proceedings or a party other than the enforcement authority is collecting debts, the Debt Collection Act will be applied to this part of the recovery process (HE 199/1996 vp, p. 10).

1.3 What is consumer debt?

The concepts used in these guidelines, consumer, business and consumer good, are based on the Consumer Protection Act:

• A consumer is a natural person who has acquired consumer goods mainly for a purpose other than for practising his/her profession.
• A consumer good is a good, service or benefit marketed to consumers or acquired to a relevant extent for a private household (section 3 of the Debt Collection Act).

The provisions concerning consumer debts are applied to

• business’s claims concerning debts which are based on having provided a consumer with a consumer good or granting credit to a consumer and
• credit that a party other than a business has granted to the consumer in the form of a loan or some other financial arrangement if the business has acted as an intermediary in providing the credit to the consumer
• claims concerning receivables of a legal person governed by public law or claims related to carrying out a public function when the debtor is a private person (section 3 of the Debt Collection Act).

Typical consumer debts include

• payments related to the subscriptions of newspapers, magazines and other products
• debts incurred from the hire-purchase transactions of goods
• credit card or bank loan debts
• insurance payments
• telephone payments.

If another party, in addition to the consumer who makes the agreement, is responsible for a consumer debt, the debt is regarded as a consumer debt if the party liable for payment is in the position of a consumer. For example, a payment which is demanded from a private person acting as a guarantor is a consumer debt if the principal debt relationship is classified as such (HE 199/1996 vp, p. 11).

As a rule, rent receivable by a private person in the role of a landlord is not a consumer debt. Nor is a maintenance fee that a residential housing association collects from the owners of its shares a consumer debt. However, the Debt Collection Act also requires compliance with good collection practice in such cases (section 1 of the Debt Collection Act). Receivables from private tenants of rental housing companies, including those owned by municipalities, are consumer debts.

1.4 The debtor has the right to be informed about his/her debt situation

The debtor has the right, to get from the creditor

• up-to-date information about the total sum of and bases of his/her debts
• itemisation of unpaid debts and repayments
• an account of the interests and costs accrued on top of the original debt (section 4a of the Debt Collection Act)
• information on the possible expiration of the debts or interruption of the expiration period (HE 21/2004 vp, p. 8).

The transfer of a debt from one creditor to another may impair the opportunities of a debtor to verify the legitimacy of the claims and other factors related to the debt collection process that affect the status of the parties to the debt relationship. To ensure the legal protection of the debtor, the creditor must, upon the debtor’s request, provide an account stating the name of the creditor which has originally incurred the costs charged from the debtor, and which creditor has interrupted the expiration, and at which point this occurred. (CO)

This information is cost-free for the debtor. However, if the debtor requests an itemisation or explanation more often than once a year, the creditor is entitled to a reasonable compensation from the debtor for the costs incurred from drawing up this document. (section 4 a of the Debt Collection Act)

When the debt collection is carried out by a collection agency on behalf of the debtor, for example, the obligation to provide information also applies to the agency. From the debtor’s perspective, the collection agency is the party representing the creditor, and the collection agency is often the party best-informed about the debtor’s outstanding debts in practice. Therefore, the debtor has a legitimate right to obtain information from the collection agency commissioned to collect debts in addition to the creditor. This obligation for a collection agency to provide information is only concerned with the debts whose collection has been transferred to the agency. (CO)

Good collection practice prohibits the provision of untrue or misleading information on matters relevant to the debtor (section 4 of the Debt Collection Act). The debtor’s need to receive information is typically related to situations where a debt or one of the debtor’s several debts is already at the debt collection stage. However, the debtor’s right to information is not limited to situations involving debt collection but is a more universal right. (section 1 of the Debt Collection Act, HE 21/2004 vp, p. 7).

Therefore, the debtor’s right to information is not limited to debts subject to voluntary debt collection. (CO)

When a debtor requests information about the total amount of his/her debts from a collection agency, the agency is not obligated to inquire from the creditor that assigned the debt collection whether the debtor has debts whose collection has not been assigned to the agency. The collection agency must refer the debtor to directly inquire about the matter from the creditor. (CO)

The debtor must be provided with information about all their debts without difficulty, regardless of the stage of invoicing or debt collection. The debtor’s right to information from a court of law or the enforcement authorities does not restrict the debtor’s right to obtain information from the creditor or collection agency. For instance, the fact that a decision or default judgement on a debt has been issued by a court of law does not remove the debtor’s right to the information referred to in section 4 a of the Debt Collection Act from a collection agency when it serves as the creditor’s agent in an enforcement matter. A debtor may be guided to inquire the amount of debt from the party assigned to collect the debt with up-to-date information about the debt amount (creditor, collection agency or enforcement authority). (CO)

The debtor’s right to information covers the information on the grounds for the debt. If the debt relationship is based on a document, such as a promissory note, the debtor has the right to obtain information about the document and see and review the original document. If necessary, the debtor must also be provided with a copy of the document (LaVM 14/2004 vp). The debtor must also be provided with information on the possible expiration of the debts or interruption of the expiration period (HE 21/2004 vp, p. 8).

The grounds for the debt may be a promissory note, subscription agreement or telephone call recording, for instance. For example, the debtor has the right to obtain access to a recording on a subscription made by telephone. As of 1 January 2023, with certain exceptions, a prerequisite for entering into a valid contract in telesales is that after the telephone conversation, the consumer accepts in a permanent manner an offer submitted by the business in a permanent manner (see sections 2 and 12 a in Chapter 6 of the Consumer Protection Act).  If the documentation indicating the basis of the receivable does not exist, the debtor must be informed about this and provided with some other account of the grounds for the debt. (CO)

An invoice is not a document serving as the basis of the receivable. Therefore, when a debtor requests to see the document serving as the basis of the receivable, the obligation to provide information may not be fulfilled by providing the debtor with a copy of the invoice. (CO)

Upon request, the debtor must be informed about when and to which address the invoice and collection letters have been sent. (CO)

The debtor must be provided with an account of interests and costs upon request. The fulfilment of this obligation to provide information requires an account of the interests and costs incurred on top of the original debt. The interest details given should include the interest rate, interest period and the amount of principal on which interest or late payment interest has accrued. (HE 21/2004 vp, p. 7–8).

Based on the debtor’s request, the debtor must be provided with an account of the measures and items of expenditure on which the collection costs are based. A list of the factors that generally affect collection costs is not such an account; instead, the debtor must be provided with an explanation of the measures actually taken in collecting said outstanding debt. (CO)

Upon the debtor’s request, the debtor must be provided with an account stating the name of the creditor that has originally incurred the costs collected from the debtor. An appropriate itemisation of measures enables the debtor to assess whether the demanded amount of collection costs is legal. It is against good collection practice to respond to a debtor’s request for information on the itemisation of collection costs by providing him/her with a balance sheet merely indicating the total sum of collection costs. (CO)

The collection of debts may not result in unreasonable or unnecessary costs or unnecessary harm to the debtor (section 4 of the Debt Collection Act).

When a debtor is investigating his/her debt status and considering measures to remedy his/her situation, it is essential to cause no undue delay in providing information. Compliance with good collection practice requires providing the debtor with the information he/she has requested without delay, paying attention to the content and extent of the request. However, the information must be provided at the latest within one month after receiving the request. (CO)

If a debtor’s request for information or documents is concerned with a situation in which the debtor has expressed a lack of clarity on the basis of the receivable such as unawareness of which debt the collection concerns, the collection process may not continue until the debtor has been provided with the requested information. (CO)

If the debtor denies the grounds for the debt or his/her liability for the payment, section 4 b of the Debt Collection Act is also applied (see section 2.7).

The General Data Protection Regulation must also be taken into account in debt collection. In processing personal data, the controller must take appropriate measures to ensure the fulfilment of the data protection rights of data subjects. Among other things, the controller must provide a copy of the personal data undergoing processing upon request.  For more detailed information, see the Office of the Data Protection Ombudsman.

2. General principles in debt collection by the creditor or the contracted agent

2.1 Initiation of debt collection process

Practices that are contrary to good debt collection practice or are otherwise unfair to the debtor must not be used in debt collection (section 4 (1) of the Debt Collection Act). An outstanding debt that has expired or otherwise ceased must not be subjected to debt collection (section 4 (3) of the Debt Collection Act). When the principal amount of the debt expires, any interests and other ancillary costs also expire (section 12 of the Act on the expiration of debt).

In the preparatory works on the Act on the expiration of debt ancillary costs are separated from independent obligations whose expiration period is not interrupted by the interruption of some obligation based on the same basic relationship (HE 187/2002 vp, p. 63). In its ruling practice concerning interest on late payments, the Supreme Court noted that the obligation to reimburse collection fees is not an independent obligation not bound to the main debt (see KKO 2012:19). Moreover, in its ruling, the Supreme Court has stated that costs caused by the Consumer Disputes Board process are ancillary costs for which no separate measure is required for interrupting the expiration (see KKO 2012:75).

The collection costs are ancillary costs of the main debt. Therefore, the debtor may not be required to pay collection costs if the main debt has expired. (CO)

When a debt collection procedure is initiated, the creditor must ensure that the procedure is justified and does not cause unreasonable consequences to the debtor.

• The debtor is responsible for the payment delay, but the consequences must be reasonable in proportion to the delay in question.
• The creditor should not gain benefit from the debtor’s delay.

In situations of payment difficulties, the principal aim must be to see the matter through by agreement and with as little inconvenience as possible. Generally, this means agreeing on a new payment date or creating an entirely new payment schedule. (CO)

If an agreement about a new payment period is made, the debtor may not be sent payment demands based on the original payment schedule.

If the outstanding debt has expired, ceased for another reason or lacks basis, it may not be collected. An invoice, payment demand or collection letter alone cannot serve as the basis of an outstanding debt. The outstanding debt must be based on an earlier debt relationship, obligation or agreement, which must be specified for the debt collection.

The general expiration period for a debt is three years from the time when the debt has become due or when the creditor can present a payment demand to the debtor. The general expiration period can be interrupted.

The general expiration period is applied if other laws have no contrary provisions to it. Several special laws have their own expiration provisions, and the provisions of these laws about calculations of terms laid down, suspension of expiration and legal effects of expiration differ from the general expiration provisions. These most commonly occur in cases of outstanding debts governed by public law. Apart from debt expiration, the debt may become obsolete as a result of a confirmed payment program in a debt adjustment for a private person. Provisions on the final expiration of a debt apply to private individuals’ monetary debts. For more information on the expiration of debt, see the Expiration of debt section on the FCCA’s website.

2.2 Debt collection must not be delayed

The collection of debts may not result in unreasonable or unnecessary costs or unnecessary harm to the debtor (section 4 (2) (2) of the Debt Collection Act).

Timeliness must be the starting point for debt collection. Debt collection must not be unnecessarily delayed. It is against good collection practice to postpone debt collection until a long time has passed after the due date if this requires the debtor to provide explanations for issues such as the existence, grounds, amount, payment or expiry of the debt that would not have been necessary when the debt was more recent. If late payment interest is accumulating for the debt from the due date, late payment interest could also be incurred on the debtor unnecessarily.(CO)

Debt collection must also not be unnecessarily and intentionally prolonged. Although the voluntary collection of outstanding debts is normally in the best interest of both creditors and debtors, the transfer of the matter to judicial collection and the loss of credit information may benefit both the debtor and the creditor in certain cases as it puts an end to the debt spiral. (LaVM 14/2012 vp).

2.3 Debt collection must not be combined with sales promotion

No conduct that violates good practice or is unfair to consumers is allowed in marketing. Unfair practices are not allowed in a customer relationship either (section 1 in Chapter 2 of the Consumer Protection Act).

The debtor must not be offered, in connection with the debt collection, new goods to be purchased or a new agreement to be made. This kind of practice could be regarded as inappropriate pressure directed at the debtor, where the consumer’s position as a debtor is taken advantage of and with which the risk of over-indebtedness of the debtor is increased. (CO)

Finnish Consumer Agency 99/40/2196: The Consumer Ombudsman asked a collection agency to abandon a practice in which the debtor was offered a new periodic subscription in connection with a collection of a debt due to an outstanding subscription bill. By making a new subscription, the debtor would have become exempted from the debt collection expenses of the outstanding subscription bill. The collection agency abandoned the practice.

2.4 Debt collection may not cause unnecessary harm

In debt collection, it is prohibited to impose unnecessary harm to the debtor (section 4 (2) (2) of the Debt Collection Act). For example, telephone collection at an inconvenient time may cause unnecessary inconvenience to the debtor (HE 199/1996 vp, p. 12).

Debt collection personally targeting the debtor must not be carried out at least on Sundays or public holidays or during weekdays between 8 p.m. and 7 a.m. (Consumer Ombudsman and see arguments for section 4 in HE 199/1996 vp)

Imposing unnecessary harm to the debtor is also considered to include restricting the ways to contact, for example, limiting contacts to one, highly specific option. Multi-channel accessibility of customer service must also be ensured in collection, paying attention to the needs and possible restrictions of different customer groups. In practice, the telephone is the only possible form of contact for many debtors in managing the debt collection matter. As a result, the availability of a telephone service must be ensured during the collection process. Also, contacts should not incur extra payments exceeding the price of a normal contact method to the debtor. (CO)

A business or a debt collection agency cannot use, in phone transactions, a service for the use of which the consumer is charged fees that exceed the price stipulated in his/her subscription agreement. (see section 14 in Chapter 2 of the Consumer Protection Act, 211/2013 and 1212/2020, enters into force on 31 December 2023 )

2.5 Debt collection must not compromise the debtor’s right to privacy

Intrusive from the viewpoint of privacy is debt collection in a manner that draws attention, for example by using envelopes with an easily distinguishable printed notice about the letter containing a payment reminder. It is inappropriate to notify or even to threaten to notify outsiders, such as the debtor’s employer, relatives or others in the debtor’s close circle, about the debtor’s payment default (section 4 (2) (3) of the Debt Collection Act and  HE 199/1996 vp, p. 12).

The debtor’s right to privacy must always be respected. In debt collection, it must always be ensured that the process under way is not revealed to third parties regardless of the methods used in the collection and regardless of who is carrying it out. For this reason, attention should be paid to details. Communication used in debt collection must be appropriate. (CO)

Phone collection as such cannot be regarded as inappropriate as long as there is no breach of privacy protection and no unreasonable inconvenience to the debtor. (CO)

If for some exceptional and specific reason it is necessary to make a collection visit to the debtor’s home, the provisions about trespassing and privacy protection must be paid special attention. It is clear that the creditor’s or agency’s representative must behave in an appropriate manner. Threatening language must not be used against the debtor or for example the debtor’s family members, nor should there be any threatening behaviour towards them. (CO)

Debt collection must be tactful, and, for obtaining payment, pressure should not be exerted in ways that complicate the situation of the debtor in an unreasonable manner or are insulting. In evaluating the acceptability of methods, the generally prevailing values in our society should be used as the measuring stick. (CO)

A draft may never be used to collect a consumer debt (section 7 of the Debt Collection Act).

2.6 Factors relevant to the debtor

In debt collection, it is prohibited to provide untrue or misleading information on the consequences of non-payment or on other matters relevant to the debtor (section 4 (2) (1) of the Debt Collection Act).

• If, during the course of debt collection, an account is given about the consequences of a failure to pay the debt, the information this contains must be accurate.
  • If the debtor is informed about the threat of a payment default entry or the loss of credit information in the context of debt collection, the debtor must be given truthful information about at what stage a payment default entry may be made in the credit register. Therefore, it is in violation of the provision to, for instance, threaten the debtor with a payment default entry if no grounds for the entry are laid down in the Credit Information Act. Provisions on payment default entries are laid down in the Credit Information Act. (see also HE 199/1996 vp, p. 12 and arguments for section 4 in HE 57/2012 p. 29).
  • For example, truthful information must be provided on possible judicial collection fees. It is against good collection practice to claim that the failure to pay an invoice by the deadline will result in a payment default entry unless there are grounds for this. (CO)
• If the creditor transfers an outstanding debt to a contracted agent for collection, the method adapted cannot be called a recovery of a debt by enforcement.
• Information about interest on late payments is also relevant to the debtor.

KKV/ 804/ 14.08.01.05/ 2021: A collection agency insisted that a debtor pay late payment interest with payment demands sent to him/her. An explanation provided by the company did not indicate that the deadline for the debt was pre-determined in a manner binding on the debtor. Therefore, demanding late payment interest from a consumer required providing the debtor with the information referred to in section 6 (2) of the Interest Act. As this information had not been provided, the debtor was not liable to pay the late payment interest. Based on the Consumer Ombudsman’s view, the liability to pay late payment interest is a relevant factor to the debtor, and in demanding that the debtor pay the late payment interest, the collection agency had provided false information about this.

• The debtor must have information about the creditor and the stage of debt collection.

It is against good debt collection practice for a debt collection agency to allow some outsider to use payment demand, invoice or letter forms, carrying the agency’s name or its company name, or other material designed for debt collection. The debtor must not be given a wrong idea about who actually is taking care of the debt collection. (HE 199/1996 vp, p. 12).

An example of a misleading and prohibited practice is when the creditor – once the debt has become outstanding – starts using, in his communications with the debtor, an auxiliary company name which might make the debtor think that the outstanding debt has been transferred for the collection of a party contracted by the creditor arguments for section 4 in 57/2012 vp, p. 29

In debt collection, the debtor must always be explained whether the collection has to do with the creditor’s own collection of debt or with a contracted debt collection. The debtor must also be informed about the stage the outstanding debt collection has reached. Thus the debtor must be notified about, for instance, whether he/she is dealing with a payment reminder sent by the creditor or a formal payment demand prior to court proceedings sent by a professional debt collector.

If a debt collection agency has been asked to take care of the creditor’s credit management services, this shouldn’t give rise to ambiguity in the debtor’s mind about whether he/she is dealing with the creditor’s invoice, payment reminder or a payment demand from the agency. (CO)

In the case of a creditor changing or a transfer of an outstanding debt, the party to whom the right for debt collection is transferred will become a new creditor for the debtor. The debtor must be informed about the change of the creditor. (CO)(see also section 25 in Chapter 7 of the Consumer Protection Act)

In any debt collection measures targeting the debtor regardless of the means employed must include at least the following essential information in a clear form:

• who is collecting debt from the debtor and this party’s contact details
• what outstanding debt the recovery process is related to
• the creditor of the outstanding debt and original creditor if applicable. (CO)

2.7 If the debtor denies his/her payment obligation

If the debtor denies his/her payment obligations, voluntary collection as defined in the Debt Collection Act may not be continued (section 4b (1) of the Debt Collection Act). In spite of the denial by the debtor, the debt collection can nevertheless go ahead if the debtor does not present any justification for the denial or invokes a justification which clearly has no bearing on the obligation to pay (section 4b (2) of the Debt Collection Act).

• If the debtor denies his/her payment obligation without presenting a justification for this, good debt collection practice requires that the debtor is asked about a justification for the denial.
• If the debtor presents grounds for the denial in such an unclear or perfunctory manner that the legitimacy of the denial cannot be assessed based on it, good debt collection practice requires that the debtor is asked to specify said justification.
• If the debtor invokes a justification which clearly has no bearing on the obligation to pay, good debt collection practice requires that, in continuing the debt collection process, an explanation is given to the debtor about why the reasons presented by him/her have no bearing on the matter. (HE 57/2012 vp, p. 31).

The debtor must present such a specified justification for the denial that has or may have an effect on his/her payment obligation. For instance, if the debtor merely notes that the outstanding debt is contested, the debtor must be asked to specify the justification for the contestation. A justification which clearly has no bearing on the obligation to pay refers to claims not concerned with the debtor’s obligation to pay the outstanding debt; for instance, the debtor may note that he/she has lost the product and is therefore unwilling to pay the outstanding debt. (CO)

The requirements set for the contestation justifications presented by the debtor cannot be very high. This particularly concerns matters for which the creditor has the burden of evidence. This would be the case, for example, in a case where the debtor claims that the agreement or some other grounds on which the outstanding debt is claimed to be based has not been created. The debtor may also dispute an outstanding debt if the product or service does not correspond to what was agreed upon or if the debt has expired (see HE 57/2012 vp, p. 30–31, see also section 1.4 above).

KKV/ 804/ 14.08.01.05/ 2021: The debtor had denied his/her payment obligation on the grounds that he/she has not placed the order that was used as the basis of an outstanding debt. In response to this, the collection agency submitted copies of the debtor’s information in the register of the creditor that assigned the debt collection as well as the invoices submitted to the customer and also informed him/her that the collection process would continue as normal. The Consumer Ombudsman noted that, by providing this evidence, the collection agency could not effectively refute the debtor’s denial. The Consumer Ombudsman considered that the collection agency had continued the voluntary collection in violation of the Debt Collection Act even though the debtor had contested his/her payment liability with appropriate justifications.

The debtor is not required to provide evidence on the validity of the denial justification and this cannot be demanded from the debtor. The debtor may also not be required to take special measures to support the denial. For instance, the debtor may deny his/her payment obligation on the grounds that someone else has ordered a product in his/her name or someone else has used the debtor’s online banking codes to draw up the agreement used as the grounds for the outstanding debt. This may affect the debtor’s payment obligation, so it is an effective form of denial. In such a situation, the debtor may not be required to report the offence, submit a copy of the investigation report or present evidence of the unlawful use of online banking codes. (CO)

If the debtor presents an assertion of payment but there is no evidence of the payment to the collection agency or creditor, the debtor must be requested to provide more specific information about the time and recipient of the payment, for example. If the payment was done a longer time ago, the debtor may not be able to provide more specific information about the payment. If the debtor’s payment cannot be found even with the more specific information, but the debtor continues to insist that he/she has paid the outstanding debt, the outstanding debt must be processed as a contested debt. (CO)

Good collection practice requires providing the debtor with a response without undue delay. (CO)

Regardless of whether the matter concerns the denial of the payment obligation or an inquiry related to the debt relationship, good collection practice requires that the situation with unclear outstanding debt is investigated before taking the following measures. This serves the best interest of both parties. (CO)

For example, the debtor may misunderstand the content of the legislation concerning the expiry of debts and deny the debt based on expiration in a situation in which no such time has passed since the debt has become outstanding that the debt could have expired in the first place. The debtor may also justify his/her denial by having paid the outstanding debt. However, when investigating the matter, it may be revealed that the debtor has paid the debt to the wrong party or has misunderstood which debt or instalment of a contract valid until further notice the payment concerned.

If the denial is based on an error by the debtor, information about this must be provided to the debtor. In this case, the debtor must also be provided with an opportunity to withdraw the denial and present an explanation of the consequences of the continuation of the denial. When informing a debtor of the consequences of denial, the information may not be false or misleading. Therefore, it is in violation of good collection practice to, for example, pressure the consumer to withdraw his/her denial of payment obligation by claiming that the denial is sure to lead to significant judicial collection fees to be charged from the debtor. (CO)

As far as directly enforceable debt for public charges (e.g. health centre payment) is concerned, a denial with justifications will not suffice; instead, the suspension of the debt collection requires a material appeal in accordance with the section 9 of the Act on the Collection of Taxes and Fees or that the debtor has used some other comparable legal protection method for the purpose (section 4b (3) of the Debt Collection Act).

Good debt collection practice requires that the debtor who disputes his/her payment obligation concerning a directly enforceable outstanding debt is guided to make a material appeal or use another comparable legal protection method if such is available for the debt in question. (HE 57/2012 vp, p. 31)

Depending on the content of the debtor’s complaint, the debtor must also be guided to request a relief or exemption if this is available for the outstanding debt in question (Consumer Ombudsman, see also  section 4.1.)

Once the debtor has disputed his/her payment obligation, it is possible for the creditor to refer the contested debt justification to the court to decide or transfer any directly enforceable debt to the process of enforced debt recovery (see the arguments for section 4 b in HE 57/2012, p. 30).

If the debtor has disputed the outstanding debt based on a justification that may affect the debtor’s payment obligation, the creditor may not initiate a demand for a matter concerning the collection of a debt in a court of law as an undisputed and clear summary debt collection procedure. (see. section 3 in Chapter 5 of the Code of Judicial Procedure  and  HE 143/2010 vp, p. 4)

When a contested debt collection matter is processed before the court, at the Consumer Disputes Board or some other resolving body, the debt collection of the contested amount must always be suspended (arguments for section 4 b of HE 57/2012, p. 31).

As expenses due to the debt collection carried out by the contracted agent, the debtor can be demanded to pay at most the amount of money that the creditor has paid or is liable to pay to the contracted agent on the basis of the contract between it and the contracted agent (section 10 of the Debt Collection Act). If the debtor contests the correctness of the collection costs based on debt collection carried out by the contracted agency, the creditor bears the burden of proof to show that it has actually paid the amount of money that is demanded from the debtor as collection costs or that it is obliged to pay that money to the contracted agent HE 57/2012 vp, p. 36).

The creditor must be able to clearly demonstrate how much it has paid or is obliged to pay to the contracted agent in compensation for carrying out debt collection. Therefore, for example in a situation in which the debtor has contested the collection costs based on not receiving proof from the creditor on the costs it has incurred due to the debt collection, voluntary debt collection may not be continued by merely providing a verbal explanation of the obligation to pay the costs when the debtor has explicitly demanded proof. (CO)

2.8 Debtor’s right to have voluntary debt collection suspended

Sometimes it is obvious that voluntary debt collection will not get the results but, instead, it unjustifiably just increases the collection costs for the debtor. In situations like this, there may be justifications for the debtor to exercise his/her right to ask for a suspension of the debt collection to transfer the matter to judicial collection. The right applies to a consumer receivable that has become due in full. (section 4 c of the Debt Collection Act).

Once the request has been made, collection costs can be demanded only for the costs of sending a collection letter deemed necessary from the viewpoint of retaining the rights of the creditor, suspension of expiration for the creditor or informing about a payment default (section 4c (3) of the Debt Collection Act)

The debtor must be informed about this possibility at the latest in the payment demand sent by a professional debt collector (section 5 a of the Debt Collection Act).

2.9 Collection of debts from minors

The collection of debt from minors must be exceptional and always well-justified. The legal competence of a minor, that is, someone under 18 years of age, is restricted. A minor can enter into agreements which, in view of the circumstances, are usual and of little significance (section 24 of the Guardianship Services Act). In addition to this, a minor has the right to decide on the proceeds of his/her own work as well as on property given to his/her administration by the guardian (section 25 of the Guardianship Services Act).

A minor does not have the right to sign a debt agreement, even if that debt was meant to be paid by the minor’s own future work income. Even with an explicit permission of the guardian, the minor cannot enter into debt commitments other than that of the student loan guaranteed by the state (section 34 of the Guardianship Services Act). To take out other loans in the name of a minor requires permission from the guardianship authority. Without such permission, the transaction carried out is not binding on the minor, nor can he/she be subjected to the collection of payments related to it.

As a rule, minors can only make cash purchases independently and the validity of buying via invoicing must be evaluated, proportioning the importance and quality of the agreement to the minor’s age and developmental stage. Businesses will carry the risk when an agreement made with a minor turns out to be invalid.

Outstanding debts that can be collected from a minor him/herself include debts that are based on agreements that a business cannot refuse from entering into agreement with the minor, according to the law.  The most common example is that of granting a compulsory traffic insurance to the owner or person having custody of a motor vehicle entered into the vehicle registry. Also debts based on the ownership of a property or occupation and control of a rented flat as well as taxation debts and restitutions for damages can be collected from minors.

When it comes to outstanding library fines, the practice used by the libraries is that minors aged under 15 get a library card with the written consent of their guardian and the guardian is responsible for the materials loaned by the minor. Meanwhile, a library card holder aged 15–17 is personally responsible for the materials loaned using his/her card.

The basis of the guardianship legislation is safeguarding the best interest and rights of persons unable to manage their financial matters due to lack of legal capacity. The law has a clear intention to protect the minor as far as possible from entering into debt so that at the start of adulthood it would be possible for him/her to start assuming the responsibilities of life without payment default entries. (CO)

The starting point in the agreement practice should be that in agreements that require the guardian’s permission, it would be agreed that the party liable for the payment would be the guardian giving the permission and not the minor using the service. Even when collection of a debt is based on grounds that directly bind the minor him/herself, the principle of protection of the minor should be paid attention to in debt collection. Collection of debts solely from a minor should be exceptional. (CO)

Good collection practice requires that collection be only targeted at minors in legally justified situations, and the debtor’s age must therefore be determined. This responsibility to verify the debtor’s age and the legality of debt collection measures targeted at a minor also applies to contracted agents. (CO)

Regional State Administrative Agency for Southern Finland; 6770/2013, 30 May 2014;

Based on a notification submitted to the Regional State Administrative Agency, a collection agency had targeted debt collection measures to a person aged 9. The demands presented by the collection agency had been based on outstanding library fines of books loaned from a city library. Based on a report obtained on the matter, the Regional State Administrative Agency found proof indicating that the collection agency had not, prior to launching the collection process, verified to a sufficient degree that targeting debt collection measures to a person aged 9 has a legal basis considering the person’s age. By failing to verify this basic fact concerning the outstanding debt, the collection agency had neglected its special obligation to act carefully and diligently. Therefore, the collection agency had acted in violation of the law and good collection practice.

A legal act into which a minor does not have the right to enter is not binding on him unless his/her guardian or someone else in a comparable position of trustee has given consent. Once the minor has reached adulthood, he/she will have to pay the debt taken out as a minor without the necessary permit or permission only if he/she consents to it (section 26 of the Guardianship Services Act).

Good collection practice requires that in connection with the collection of an outstanding debt the debtor is explained his/her rights. This applies to a situation where the minor has reached adulthood, and the collection begins for a debt for which he/she didn’t have competence. (CO)

2.10 Contents, amount and time limits of payment reminders

The collection of debts may not result in unreasonable or unnecessary costs or unnecessary harm to the debtor (section 4 (2) (2) of the Debt Collection Act). The debtor must be reminded of the outstanding debt before giving or sending a payment demand (section 5 (1) of the Debt Collection Act).

A payment reminder usually is a reminder invoice or some other notification about an invoice or other debt still remaining unpaid that has been sent by the creditor. A contracting agent for the creditor can also issue a payment reminder.

A payment reminder is not in question when information about a debt having become due or about an unpaid debt has been added for example to the next monthly invoice and no separate reminder has been sent to the debtor. In that case, no collection costs can be charged. (CO)

A creditor’s reminder is often in writing, but it can also be issued in other ways, for example by phone, electronically or via a collection visit. A payment reminder incurring costs for the consumer can be sent also electronically, for example by email or by text message, if it has been agreed between the creditor and the debtor that the information related to the contractual relationship may be provided with this communication mode (HE 57/2012 vp, p. 34).

A payment reminder incurring costs for the consumer can be sent also electronically, for example by email, if this electronic communication mode has been used between the creditor and the debtor or if there is a separate agreement about submitting payment reminders electronically. (CO)

In relation to the payment methods of invoices, the Consumer Ombudsman has outlined that: “The used invoicing method and the payment alternatives available to the consumer must be clearly agreed with the consumer. For example, obtaining the consumer’s email address in the context of a sale does not suffice as a justification for sending the invoice to him/her by email; instead, a separate agreement about this invoicing method is necessary. When offering electronic invoices, you must keep in mind that several service options for receiving and storing such invoices are available in the market. The consumer may not be interested in the electronic option unless he/she will receive the invoice to the same address where his/her other electronic invoices are sent”. (Consumer Ombudsman’s guideline Payments and invoicing, section 4.6.)

The creditor or the agent cannot during the course of debt collection unilaterally change the means of communication unless it becomes obvious that the debtor can no longer be reached in the agreed manner. The debtor’s communications during the course of debt collection can naturally be answered by using the contact information and mode provided by the debtor. (CO)

Section 10 b of the Debt Collection Act lays down provisions on the earliest point when a new cost-incurring collection letter may be sent (section 10 b of the Debt Collection Act).

• A payment reminder, incurring costs recoverable from the debtor, can be sent in accordance with the 2 x 14 days rule: a normal invoice must be sent 14 days before the due date. The chargeable reminder can be sent after 14 days from the invoice’s due date at the earliest.
• If it has been agreed that no separate invoice is to be sent, collection costs can be claimed for the payment reminder if it is sent after 14 days from the due date at the earliest.
• Collection costs for a payment reminder can be claimed only if at least 14 days has elapsed from the sending of the previous payment reminder.

Debt collection must always comply with good collection practice and the requirement that the collection of debts may not result in unreasonable or unnecessary costs or unnecessary inconvenience for the debtor. As a result, collection measures must ensure that the debtor will have a sufficient payment period or time to present comments on the matter (see LaVM 2/2022 vp, p. 5).

While the debtor is liable to pay the debt collection expenses incurred by the creditor, the debtor cannot affect the distribution of collection letters or what the creditor or collection agency and delivery partner have agreed on the matter. This makes it important to always reserve enough time for the consumer to react, i.e. correct his/her failure to pay, obtain explanations and itemisations for the debt and make comments about the debt. A sufficient period of at least ten days must be allocated to the debtor for carrying out the payment and presenting his/her comments. The allocation of time is meant to provide the debtor with at least ten days’ time from the arrival of the collection letter to respond – not from the date of the letter, that is. Therefore, when setting the date due, the maximum time that it takes for the distribution company to deliver the letter and a possible weekend and public holidays intervening between sending and receiving the letter must be taken into account. (Consumer Ombudsman see also the detailed arguments in section 4 of HE 199/1996, p. 12).

Even though the creditor can bring an action of performance before the court without preceding voluntary collection practices, good debt collection practice requires that the creditor has sent the debtor at least one payment reminder concerning the outstanding debt before resorting to more severe measures such as suspending a service, making the whole debt due or taking the matter before the court (CO) (see also HE 199/1996 vp. p. 7).

If a professional debt collection agent is recovering the debt, the debtor must be given or sent a demand for payment in accordance with the Debt Collection Act before judicial collection (section 5 (1) of the Debt Collection Act, see. section 3.2.).

The Debt Collection Act does not contain provisions on the content of a payment reminder sent by the creditor. To consider contacting the debtor as a payment reminder, the debtor must receive sufficient information about the creditor and the outstanding debt to enable the debtor to identify the outstanding debt subject to collection and, if necessary, submit comments about its amount and basis (HE 57/2012 vp, p. 34).

According to good debt collection practice, it can be expected that the chargeable payment reminder sent to the debtor gives sufficient details for the checking of the payment and legality of the debt, such as:

• creditor’s name and contact details
  • If the name used for the creditor differs from that in the agreement or other act on which the debt is based, the name originally used for the creditor must also be provided in the payment reminder. When collecting a transferred debt, the name of the original creditor must also be provided.
  • If a contracted agent sends a payment reminder on behalf of the creditor, the payment reminder must contain information about who is collecting debt from the debtor and this party’s contact details.
• basis of the debt, invoice details and invoice total
• payment address and date due
• information about to whom possible comments about the debt should be presented and within what time. (CO)
  • A special mention must be made about a municipality’s or public organisation’s specific time-limit for appeal and a possibility for an exemption or reduction for social and health care payments, for example. (see section 4.1.)
  • To prevent making the debtor’s payment difficulties worse, it would be desirable to also inform the debtor about what will happen if the debt is not paid. If the payment reminder tells about the consequences of a failure to pay the debt, the information must be accurate. (CO)

2.11 Voluntary debt adjustment and good debt collection practice

A responsible attitude towards payment arrangements must be taken in debt collection (section 4 of the Debt Collection Act).  This applies both to creditors and their agents.

The creditor or the agent is not obliged to accept the proposed payment arrangements, but, on the other hand, a systematic refusal to enter into various voluntary arrangements cannot be regarded as appropriate, either (HE 57/2012 vp, p. 28).

For consumer credits, the creditor does not usually have a right to demand the repayment of the entire remaining credit if the matter concerns an overdue payment and if the delay is due to a so-called social force majeure, that is, the consumer’s illness, unemployment or other comparable factor they could not control, unless this is manifestly unreasonable for the lender due to the duration of the delay or other factors (section 34 in Chapter 7 of the Consumer Protection Act). The preconditions for calling in a loan are laid down in section 33 in Chapter 7 of the Consumer Protection Act. In social force majeure situations, the creditor must primarily aim to solve the situation with the debtor with payment arrangements (section 13 (5) in Chapter 7 of the Consumer Protection Act).

The creditor must always, on a case-by-case basis,

• consider whether, taking the circumstances into account, the payment arrangement can be regarded as reasonable
• aim to, as far as possible, reach an amicable settlement.

Moreover, the creditor’s benevolent attitude towards various payment arrangements is particularly important when dealing with a debt secured by the debtor’s dwelling (HE 57/2012 vp, p. 29).

In practice, payment arrangements can be divided into extended payment periods or payment plans concerning individual debts and voluntary debt settlements taking into account the debtor’s all debts and economic situation. The Debt Collection Act requires that the creditor and the contracted agent take a responsible attitude towards all payment arrangements.

The starting point in all arrangements must be that, based on the information received, the arrangement is realistic considering the debtor’s expected ability to pay. The assessment of the ability to pay must be made based on sufficient information concerning the consumer’s income and other financial circumstances and also paying attention to the economic significance of the arrangements.

In assessing the ability to pay, it can be indicatively considered what section 14 of Chapter 7 provides on the lender’s obligation to assess the consumer’s creditworthiness,(HE 57/2012 vp, p. 29).

Encouraging the debtor to contact you to settle a debt issue is recommended.  The financial significance of the debt adjustment must nevertheless be taken into account so that the settlement concerning the payment arrangements does not become too difficult for the debtor and the creditor or contracted agent. Even if debtors had access to other contact methods, in practice, the telephone is the only possible contacting method for many debtors in managing their issues. For example, an extension to the payment schedule or a payment plan in relation to an outstanding invoice which is small in view of the debtor’s financial situation must in principle be possible based on the information given by the debtor and asked from him/her on the phone. (CO)

The creditor or the contracted agent must provide the consumer with information and advice to prevent payment problems from arising or becoming more serious and for managing default situations (arguments in section 4 in HE 57/2012, p. 29 and section 13 in Chapter 7 of the Consumer Protection Act).

If, during the course of debt collection, it is found that the debtor needs help in sorting out the overall situation and in the settlement of payment arrangements, he/she should be told about the assisting bodies (for example, financial and debt counselling services) to turn to. (CO)

The responsibility to give advice is more emphasized in the case of a professional debt collector, who should know the legislation and systems related to the management of debt relationships and over-indebtedness, than in the case of, for example, a small entrepreneur who cannot be expected to have similar expertise. (CO)

3. Special features in the debt collection carried out by the contracted agent

3.1 Professional debt collector’s special obligation to act carefully and diligently

A professional debt collector, such as a debt collection agency, has to pay special attention to the debtor’s rights regardless of the creditor being the customer (see HE 199/1996 vp, p. 11). The contracted agent is expected to show special care and diligence in debt collection.

Regional State Administrative Agency for Southern Finland 12620/2017, 28 September 2018: A collection agency had sent a debtor a payment demand on 4 May 2016 and 23 May 2016 to an address it had obtained from the creditor. This was the debtor’s previous address. The collection agency was informed of the debtor’s new address on 7 July 2016. The collection agency sent a new payment demand to the debtor’s new address and lodged a writ of summons at the District Court on the same date. Considering that, prior to filing the claim, the collection agency had found out that the payment demands it had previously sent had been sent to the wrong address, the collection agency should have at this point confirm that the debtor had received the payment demands by sending a new payment demand to the correct address before filing the claim or, by using other contact information, confirmed that the debtor was aware of the unpaid debt and the payment demands it had previously sent on the debt. By failing to follow this procedure, the collection agency had acted in violation of the law and good collection practice.

The professional debt collector’s special obligation to act carefully and diligently includes a duty to confirm those central task-related basic facts that can be clarified in a reasonably effortless manner. The contracted agent should, for example, check with the creditor before sending a payment demand that the creditor itself has reminded the debtor about the debt having become outstanding.

Outstanding debts not compliant with the law or clearly lacking justification may not be taken to debt collection. The agent must refuse to collect an expired debt or to claim higher interest on late payment than decreed in the Interest Act, for instance. However, good collection practice has been considered to not include a general obligation for collection agents to investigate the legitimacy of receivables. If a contracted agent is commissioned to recover a debt that is so old that is would have expired under the applied expiration provision, the agent must confirm that the expiration has been interrupted. (HE 57/2012 vp, p. 30)

Although the contracted agent has the right to trust in the legitimacy of the basis for the debt as a rule, the agent must nonetheless ensure that it will not take on assignments for collecting illegal or clearly groundless debts. For example, the collection agent must refuse the collection of an outstanding debt insofar as the assignment concerns credit costs exceeding the maximum level set in price regulation laid down in section 17 a of Chapter 7 in the Consumer Protection Act. Good collection practice includes confirming the legality of the debt and abandonment of the collection of groundless overdue payments, also in situations in which the contracted agent has reason to suspect the grounds for and legality of the debt based on court decisions concerning the debt basis, number of consumer complaints or observations by the authorities, for instance. (CO)

Court of Appeal of Eastern Finland 28 June 2018, reg. no S 17/941: The effective annual interest rate on a credit exceeded the maximum level for credit costs laid down in section 17 a of Chapter 7 in the Consumer Protection Act (207/2013). The collection agency had acted in violation of good collection practice by charging credit costs exceeding the maximum level for credit costs that were to be deemed unlawful and clearly groundless. 

Supreme Administrative Court; 1084/2/14: A collection agency had taken on an assignment to collect a debt that had already been paid and on which a complaint had been submitted to the collection agency previously. The collection agency appealed that it had acted diligently in agreeing with the creditor that it would not assign the agency to collect legally groundless debts. Based on the Supreme Administrative Court’s view, the commission agreement does not exempt the collection agency from its duty under law to comply with good collection practice and act lawfully.

Regional State Administrative Agency for Southern Finland 9747/2017; 13 June 2018: A collection agency had been recovering the debts of a creditor. Of the creditor’s assignments, the collection agency had terminated 1,558 as a result of debtors’ notifications of contest and the creditor had terminated 1,048 as a result of debtors’ notifications of contest. None of the debt collection matters had been transferred to judicial collection. The European Consumer Centre had informed about the high number of complaints about the creditor’s receivables. Based on contacts, consumers in several European countries had been sent invoices for products they had not ordered. The collection agency considered that the matter concerned individual consumer receivables and the creditor’s receivables could not be considered categorically groundless. Based on the Regional State Administrative Agency’s view, the high number of complaints and lack of clarity on the grounds for the outstanding debts as well as observations by the consumer authority gave the collection agency a reason to suspect the lawfulness of similar debts by the creditor.

Based on the professional debt collector’s special obligation to act carefully and diligently, the collection agency had the duty to confirm the legality of the grounds for the debt before taking collection measures. The Regional State Administrative Agency noted that a collection agency can confirm the legality of the grounds for the debt, for example, by asking the creditor for permission to see the agreement on the order or listen to telephone recordings. Based on the Regional State Administrative Agency’s view, the collection agency had acted in violation of the law and good collection practice by failing to confirm the legality of the grounds for the creditor’s receivables before initiating collection even though the collection agency was aware of lack of clarity in the grounds for the creditor’s similar debts.

3.2 Payment demand

3.2.1 Delivery method of a payment demand

According to the Debt Collection Act, a professional debt collector engaged in the recovery of consumer debt must send the debtor a written payment demand. However, it can be delivered to the debtor also in some other durable medium if the debtor has specifically accepted in writing or electronically the delivery of notifications concerning the debt in this manner (section 5 (2) of the Debt Collection Act). A durable medium refers to delivering the payment demand to the recipient in electronic form so that the recipient can save and reproduce it in unaltered form (see section 3 a of the Debt Collection Act ). Such electronic delivery methods include a bank’s e-invoice, e-mail and electronic mailbox.

A debtor can give their consent to the collection agency or the creditor if the party delivering a demand for a payment is further specified in connection with giving consent. The given consent may only include one party serving as a professional debt collector. The period of validity of the consent will not continue if the party collecting the debt changes. (HE 241/2021 vp, p. 51–52)

Consent must be given separately, not as part of other contractual terms, for instance. Consent may also not be set as the default option. Consent must be voluntary and the debtor may not be pressured to transfer to using the electronic medium or selecting a specific electronic delivery option.  The debtor may not be led to believe that receiving letters by mail is not an option or that only some electronic delivery method is available if several electronic methods are actually available. (HE 241/2021 vp, p. 51)

The consent may not be valid for more than 12 months and the debtor has the right to withdraw his/her consent at any time. The period of validity is considered to begin at the moment the debtor gives his/her consent to the professional debt collector or the creditor. After the expiry of the consent, the continuation of the consent requires obtaining new consent. For example, the basis for renewing the consent of a consumer may not be that the consumer has failed to separately respond to or oppose the continuation of electronic delivery and renewing his/her consent. (LaVM 2/2022 vp)

At least the following information must be provided in the consent:

• the durable method used for the delivery of the payment demand
• the party sending the payment demand
• the debt(s) the consent applies to
• the date of issue and period of validity of the consent.

The burden of proof for the existence and extent of the consent lies with the party that has delivered the payment demand with the other durable medium (HE 241/2021 vp, p. 52).

A payment demand concerning a specific individual debt can be delivered to the debtor also in some other durable medium if the debtor, after the debt has become outstanding, has specifically accepted the delivery of notifications concerning the debt in this manner. (section 5 (3) of the Debt Collection Act)

When delivering a payment demand to a debtor in another durable medium, the professional debt collector shall take sufficient care to ensure that the payment demand has actually reached the debtor. (section 5 (4) of the Debt Collection Act)

Sufficient care is assessed in relation to the used delivery medium, and such technical methods and delivery mediums must be used in the delivery of a payment demand that enables confirming that the demand has actually reached the debtor. For example, if a payment demand is delivered;

• by email, the consumer can be asked for separate confirmation on the reception of the payment demand
• electronically to a personal customer folder maintained by the collection agency, the consumer must receive a notification to another channel indicating that the payment demand has been submitted to the customer folder. It is therefore not enough to merely make the payment demand available to the consumer in his/her customer folder arguments for section 5 (4) in HE 241/2021 vp, p. 53).

In disputes, case-by-case assessment is applied. In case of a failure to ensure that the payment demand has actually reached the debtor or to request consent as laid down in the law, the procedure is assessed in accordance with sections 4 and 6 of the Debt Collection Act (HE 241/2021 vp, p. 53)

A guardian or the person with a continuing power of attorney has the right at their own request to receive payment demands in writing or electronically. No separate fee can be charged for this. (section 5 (5) of the Debt Collection Act)

3.2.2 Delivery of a payment demand

No payment demand must be given or sent before the debtor, after the debt has become outstanding, has been reminded about the debt and at least 14 days has elapsed from the giving or sending of a payment reminder (section 5 of the Debt Collection Act).

Debt collection must always comply with good collection practice and the requirement that the collection of debts may not result in unreasonable or unnecessary costs or unnecessary inconvenience for the debtor. As a result, collection measures must ensure that the debtor will have a sufficient payment period or time to make comments on the payment. (see LaVM 2/2022 vp)

While the debtor is liable to pay the debt collection expenses incurred by the creditor, the debtor cannot affect the selection of the collection agency, the distribution of collection letters or what the collection agency and delivery partner have agreed on this matter. This makes it important to always reserve enough time for the consumer to react, i.e. correct his/her failure to pay, obtain explanations and itemisations for the debt and make comments about the debt. A sufficient period of at least ten days must be allocated to the debtor for carrying out the payment and presenting his/her comments. The allocation of time is meant to provide the debtor with at least ten days’ time from the arrival of the collection letter to respond – not from the date of the letter, that is. Therefore, when setting the date due, the maximum time that it takes for the distribution company to deliver the letter and a possible weekend and public holidays intervening between sending and receiving the letter must be taken into account. (CO)(see section 2.10)

A professional debt collector generally cannot claim payment of a consumer debt in court before a payment demand compliant with the law has been given or sent and the time limit set in the demand for payment of the receivables and for debtor’s comments has expired. If the payment demand has been delivered to the debtor in another durable medium, payment of the receivable may not be claimed in court before the professional debt collector has taken sufficient care to ensure that the payment demand has actually reached the debtor. (section 6 (1) of the Debt Collection Act)

Without having given or sent a payment demand, a professional debt collector can claim the payment before the court only if

• postponement of court proceedings could bring about disqualification to the creditor or there is some other compelling reason to start the proceedings (e.g. the debtor quite clearly tries to avoid paying the debt), or
• the debtor has disputed his/her payment obligation or asked the debt collection to be suspended and the matter transferred to judicial collection (section 6 (2) of the Debt Collection Act).

If a proper payment demand as required by the Act has not been given, the debtor is not obliged to reimburse the collection costs unless it is a case of a minor negligence of the professional debt collector (see section 10 of the Debt Collection Act).

3.2.3 Content of a payment demand

The payment demand ensures that the debtor is provided with sufficient information to clarify the correctness of the debt and to evaluate his/her own legal position (HE 199/1996 vp, p. 13).

The payment demand must mention at least:

• Creditor’s name and address (section 5 a (1) (1) of the Debt Collection Act).
  • If the name used for the creditor at the debt collection stage differs from that in the agreement or other act on which the debt is based, the name originally used for the creditor must also be provided in the payment demand. In such situations, the payment demand must therefore indicate both the name currently used by the creditor and the name originally used for the creditor. Also when collecting a transferred debt, the name of the original creditor must be provided (section 5 a (3) of the Debt Collection Act, HE 57/2012 vp, p. 35)
• The basis of the receivable (section 5 a (1) (2) of the Debt Collection Act).
  • The information must be provided in a format that enables the debtor to itemise the receivable. (HE 57/2012 vp p. 34)
  • In the itemisation, the debt relationship, obligation or agreement that the outstanding debt is based on must be mentioned (HE 199/1996 vp. p. 13). Additionally, when collecting a health centre fee, the payment demand must include the date of the treatment that is the basis of the payment (HE 57/2012 vp. p. 34)
• Information on the outstanding debt so that the details of the principal of the debt, interest, late payment interest and collection costs are given. In addition, the total sum of these items must be presented. If the calculation basis for the interest is not mentioned, the debtor must nevertheless be informed that he/she can get, by request, a clarification about how the interest is determined (section 5 a (1) (3) and (4) of the Debt Collection Act).
  • Upon request, the debtor must be provided with an account of the measures and items of expenditure on which the collection costs are based. However, it is in the best interest of both parties that the payment demand already contains sufficient information. It is therefore recommended that the payment demand includes an itemisation of collection costs per each measure. (CO)
  • As a general principle, the interest details given in the payment demand should include the interest rate, interest period and the amount of principal on which interest or late payment interest has accrued. Also, the amount in euros must be given. (CO)
• How, when and to whom the receivable shall be paid (section 5 a (1) (5) of the Debt Collection Act)
  • The payment demand must include in a date format information about the due date on which the payment must be paid at the latest. It is therefore in violation of good collection practice to state the due date as “immediately” or after a certain time has passed from the date of the payment demand. (CO)
  • An invoice might easily be paid multiple times if several persons are responsible for the debt and a separate payment demand is sent to each jointly and severally liable debtor. Good collection practice requires that, in such situations, an explanatory text is added to the payment demand about it having been sent to all the jointly and severally liable debtors. (CO)
• The debtor’s opportunity to comment on the amount and basis of the receivable and the time limit for making comments must be presented. (section 5 a (1) (6) of the Debt Collection Act)
  • In the debt collection of directly enforceable debt by public organisations, the payment demand shall inform the debtor of the remedies available in the collection of such a receivable and the possibility of applying for a deferral of payment (section 5 a (1) (6) of the Debt Collection Act)
  • In a payment demand concerning a social and health care fee of a wellbeing services county, the contracted agent must at the latest also inform the recipient of the right to exemption or reduction for social and health care customer fees or other charges imposed by a public organisation unless this information has been previously provided by the wellbeing services county. (Consumer Ombudsman, see section 11 of the Act on Client Charges in Healthcare and Social Welfare and section 4.1)
• To whom possible comments should be presented (section 5 a (1) (7) of the Debt Collection Act)
  • If the debt to be collected is a debt to a public organisation, a separate notification must be made, providing the contact details of the unit or person in charge of the debt collection to whom the debtor can direct his/her comments concerning the outstanding debt and debt collection (see section 5 a (1) (7) of the Debt Collection Act).
  • The debtor must be informed of the fact that the outstanding debt has been transferred from the original creditor to be collected by a contracted agent and that future dealings will take place with the agent. (CO)
  • The demand must include the contact details of the customer service organisation or contact person to whom the debtor can present his/her comments. The debtor must be able to contact the customer service easily. (CO)
• If the collection costs demanded are higher than the maximum amounts specified by the Debt Collection Act, a breakdown of the collection costs demanded and the grounds for them must be presented to the debtor. Also, the debtor must be notified that the costs are higher than the maximum amounts otherwise applied (section 10 a (3) of the Debt Collection Act).
• In the course of the debt collection process, the approach towards the payment arrangements to be agreed on with the debtor must be responsible, and in payment delay situations the consumer must be provided with information and advice to prevent payment difficulties from arising or deepening (section 4 of the Debt Collection Act and section 13 of Chapter 7 in the Consumer Protection Act).
  • Therefore, it is recommended to provide information about the possibility of payment arrangements in the payment demand. (CO)
• The payment demand must mention the consumer debtor’s right to request that collection be suspended and the matter transferred to judicial collection and explain how the suspension is to be requested as well as the legal effects of making such a request. (section 5 a (2) of the Debt Collection Act)

3.3 Debtor’s protection of payment

A payment paid by the debtor to the creditor’s contracted agent is also valid against the creditor. An agreement made by the debtor and contracted agent on the term of payment, payment method or other arrangements related to the payment of the receivable is also binding on the creditor (section 8 (1) of the Debt Collection Act). The debtor has the right to assume that the agent acts within the scope of its authority when making agreements concerning the commission.

After the matter has been transferred to the contracted agent, the payment is admissible even if the debtor paid the outstanding debt to the creditor. The collection costs already incurred to the creditor due to the agent’s actions can, nevertheless, be claimed from the debtor. The creditor must inform the contracted agent of the received amount without delay to avoid any unnecessary collection costs. (CO)

Unnecessary costs include any costs incurred by collection measures resulting from a failure of the creditor to fulfil its duty to report the received amount to the contracted agent without delay. Such costs incurred due to collection measures cannot be recovered from the debtor. (CO)

An instalment paid by the debtor based on deficient or incorrect payment information does not affect the timeliness or binding nature of the payment towards the debtor’s creditors. As a part of good collection practice, the collection agency investigates and allocates the instalments it has received to the correct receivable without undue delay. As a result, interest on late payments may be demanded from the debtor only from the due date until the date of payment. An instalment by the debtor may be allocated based on other details shown on the payment, such as the information about the amount, creditor or payment reference details. (CO)

3.4 Value added tax in consumer debt collection

The contracted agent cannot collect, from the debtor, value added tax on the commissioned transaction in case of a consumer debt where the creditor has the right to deduct or receive as a tax refund, the value added tax portion included in the collection dues in its own tax return. If the value added tax paid for collection services does not remain as the company’s or public organisation’s cost, this cannot be collected as a part of collection costs from the customer debtor (see MT 2001/005).  The maximum collection cost amounts include value added tax in the cases where the tax can be levied from the consumer debtor (HE 21/2004 vp. p. 10).

3.5 Collection of a debt created abroad

A debt collector registered in Finland can be contracted for collecting a debt created abroad.

In voluntary debt collection of a foreign debt, in addition to good collection practice, special features associated with the debt must be paid attention to. In particular, the basis of the debt must be clarified, as it is often based on foreign legislation unfamiliar to the debtor. Language difficulties and travel schedules might also have prevented or limited the debtor’s ability to respond on the spot. For this reason, it is important that the debtor’s legal position and legal protection methods available are explained to him/her in the debt collection process. (CO)

4. Public organisations’ special role

When a public organisation collects its receivable debts from citizens, the approach taken in the collection must

• be appropriate and tactful; and
• pay attention to at least the same requirements as a business does when collecting debts. The Consumer Ombudsman exercises oversight also over public organizations’ debt collection from private individuals before the enforcement stage is reached.

When collecting debts governed by public law, it must be taken into account that debt collection in this case is a public task in which the requirements of good administrative practices in accordance with the Administrative Procedure Act must be followed.

Parliamentary Ombudsman 30 September 1999, reg. no 1681/4/97.  When passing the debt collection to a contracted agent, the public organisation must take into account that private collection agencies engaged in professional debt collection do not act with official responsibility. The public organisation must therefore adequately supervise the agent’s debt collection practices.

From the perspective of avoiding unnecessary costs for the debtor, it is important that public organisations consider the debtor’s entire financial burden before increasing the costs to be paid by the debtor. (see section 4 of the Debt Collection Act). For example, a social and health care fee imposed based on the person’s ability to pay must not be collected for the part that its collection endangers the person’s or family’s prerequisites for subsistence or the fulfilment of the person’s statutory obligation for child maintenance. A wellbeing services county may also decide to not collect or to reduce fees other than those imposed based on the person’s ability to pay (section 11 of the Act on Client Charges in Healthcare and Social Welfare , see section 4.1.).

The debts to public organisations are generally directly enforceable and also the collection costs of these receivables are directly enforceable, regardless of whether they result from the creditor’s debt collection activities or from managing the debt collection commission. Under section 10 of the Debt Collection Act, the debtor can be responsible for reimbursement of collection costs only to the creditor, a contracted agent can no longer independently demand the payment for collection costs. When directly enforceable debts are being collected, the creditor bears the responsibility also for the correctness of the collection costs (HE 57/2012 vp, p. 40.). A creditor whose receivable is directly enforceable under law is also responsible for collecting the receivable in the correct amount in enforcement and ensuring that no expired debts are collected (HE 83/2006 vp, p. 87).

Public organisation services are also used by minors. According to the main rule, minors should not be allowed to run into debt at that age. The guardian should assume the obligation to pay for legal transactions that require his/her consent. Invoicing of health centre visits and various social services should, already on the basis of maintenance liability, primarily target the guardian of the minor. The minor must, however, have an opportunity to get these services anonymously, without his/her guardian being aware of it (sections 7 and 9 of the Act on the Status and Rights of Patients​​  and see section 2.9: Collection of payments from minors).

Deputy Parliamentary Ombudsman 18 June 2009, reg. no 1090/2007. The matter concerned the collection of the client’s share of an emergency transportation fee. Based on the decision, for a child aged under 10, as the child is unable to make decisions on his/her care, the creditor must find out who the child’s guardian is and primarily target the enforcement of the fee and collection measures to him/her.

Deputy Parliamentary Ombudsman 19 February 2019, reg. no 89/2018. The matter concerned the fee for an outpatient clinic appointment for a 17-year-old child that was not cancelled. The decision noted that due to the child’s best interest, the child must be protected against over-indebtedness by paying special attention to the grounds for enforcement. This means that to determine the will of a child aged over 15, the invoice is initially sent to him/her. If the child expressly states that he/she wishes that the invoice is not sent to his/her guardian, the enforcement for a child aged over 15 is justified as a rule, at least if she/he has originally sought treatment independently. If the child does not respond to the invoice, there is no reason not to invoice the fee and collect it from the child’s guardian as a child maintenance expense if the circumstances of the matter are in favour of this assessment.

4.1 Public law receivables

From the perspective of applying the Debt Collection Act, there are four kinds of outstanding debts governed by public law:

• Receivables to which the Debt Collection Act is not applied at all. Typical examples include taxes, fines and fees for duties performed by the government’s authorities.
• Receivables to which the Debt Collection Act is applied but which cannot be transferred for collection by a contracted agent (see section 9 of the Debt Collection Act). Examples of these include parking tickets and public transport inspection fees.
• Receivables to which the Debt Collection Act is applied and which can be transferred for collection by a contracted agent. Typical examples include customers’ payments for social and health services, payments for elderly care, day care payments and some payments to educational institutes.
• The receivable is of a private law nature.

Public receivables are generally directly enforceable under a relevant law or statute. However, for example rent receivables from rental housing unit companies owned by municipalities are not directly enforceable. These charges come under private law by their nature. If the voluntary collection of these debts – by the creditor or the contracted agent – does not succeed, payment of the debt has to be demanded in court to get an enforceable judgment.

Insurance companies which are private companies have in some cases the right based on law to collect their debts directly through enforcement.

If the value added tax paid for collection services does not remain as the public organisation’s cost, this cannot be collected as a part of collection costs from the debtor. The maximum consumer collection cost amounts include value added tax in the cases where the tax can be levied from the debtor.

It is the professional debt collector’s responsibility to provide the debtor with a payment demand in writing or some other durable medium. In the collection of directly enforceable debts, both the creditor and the contracted agent must give the debtor information about the possibility of obtaining postponement for the payments and about the legal means available.

A consumer may submit a material appeal if the debtor thinks that the debt has been ordered and attributed erroneously (section 9 of the Act on the Collection of Taxes and Fees) . Additionally, consumers have the right to get a discount or be fully exempt from a social and health care fee or other fees for the part that its collection endangers the person’s or family’s prerequisites for subsistence or the fulfilment of the person’s statutory obligation for child maintenance. The wellbeing services county must provide information about the right before or during the first service event. However, if it is not possible to provide this information before or in connection with a service event, it may be provided later, however at the latest when collecting the payment. (section 11 of the Act on Client Charges in Healthcare and Social Welfare)

The contracted agent must confirm that the debtor has been provided with information about the right to a discounted payment or being fully exempted from the payment before imposing collection measures. If this has not been done, information about this right must be provided in connection with collection. (CO)

In addition, a notification about the contact details of the unit or person in charge of the debt collection of the public organisation must be made, so that the debtor can direct his/her complaints concerning the outstanding debt or debt collection there. (see section 5 a (1) (6–7) of the Debt Collection Act)

5. Collection costs

The debtor must compensate the creditor for reasonable expenses arising from debt collection. Compensation liability may be based both on the expenses due to the creditor’s own collection actions and on the expenses incurred by the creditor for having to provide compensation for the contracted agent for carrying out debt collection (section 10 (1) of the Debt Collection Act). Provisions on the maximum debt collection cost amounts are laid down in section 10 a of the Debt Collection Act.

When assessing the reasonableness of the costs to be reimbursed, the factors to be taken into account include

• the amount of the receivable
• the amount of work performed
• appropriate debt-collection method in the matter
• other factors

Imposing unreasonable or unnecessary costs or unnecessary harm to the debtor is explicitly prohibited under section 4 of the Debt Collection Act on good collection practice. These general provisions must be applied to all collection activities targeted at consumers regardless of who collects the debt and what kinds of receivables the collection concerns.

In the preparatory work on the Debt Collection Act, it was noted that the general requirement for the reasonableness of collection costs and the assessment criteria for reasonableness also apply to the costs of those collection measures on whose maximum amounts separate provisions have been laid down. According to the preparatory works, the aim is not to be able to collect the maximum amounts from debtors without questions; instead, the collection costs demanded must be justified and reasonable in each case as laid down in section 10 of the Act.  It has been expressly emphasised that the amounts in euros that apply to the collection costs of consumer receivables laid down in the Act are not intended as standard reimbursement of collection costs but merely as maximum amounts. (HE 21/2004 vp, p. 10 and HE 57/2012 vp, p. 18)

When assessing the reasonableness of the costs, the amount of the receivable and amount of work performed must be taken into consideration among other issues. The assessment of reasonableness is an overall assessment in which any factor affecting the matter must be taken into consideration (HE 199/1996 vp, p. 15). Taking into account the amount of the receivable does not mean that collection costs should be imposed as a formulaic share of the receivable (HE 21/2004 vp,p. 6). In the preparatory works on the Debt Collection Act, laying down the provisions on the maximum collection costs, the need to pay attention to the amount of receivables was expressly justified by the fact that, especially in the context of small and medium-sized debts, the imposed collection costs may have been unreasonably high, surpassing the actual amount of debt (LaVM 14/2012 vp).

If the costs in the opinion of the consumer are unreasonable or without justification, the consumer may contest the creditor’s claim based on the justification or amount of the costs, and the consumer can submit the dispute over the collection cost to the Consumer Disputes Board.

The debtor is not obliged to reimburse the collection costs

• if the creditor or the contracted agent has acted contrary to good collection practice or
• if the creditor or contracted agent has continued debt collection after the obligation to pay has been disputed (for more details, see section 2.7 If the debtor presents comments about the debt) or,
• If the creditor or contracted agent has continued debt collection after the debtor has asked the debt collection process to be suspended and the matter transferred to judicial collection (for more details, see section 2.8 Debtor’s right to have voluntary debt collection suspended) or
• if the professional debt collector has not provided the debtor with a payment demand in accordance with the law (for more detail section 3.2 Payment demand),
• if the creditor or contracted agent has used a draft to collect a consumer debt (see section 7 of the Debt Collection Act),
• unless the reprehensibility of the conduct or neglect of the creditor or contracted agent can be considered minor (section 10(3) of the Debt Collection Act).

The debtor is responsible for compensating debt collection costs only to the creditor of the principal sum. The debt collection agency or other contracted agent thus has no right in their own name to demand compensation for collection costs from the debtor. This applies regardless of whether the debt is directly enforceable or not.

Helsinki Administrative Court 26 August 2021 (H4007/2021): Based on the Administrative Court’s view, the total amount of collection costs for retrospective recovery, for which various creditors are responsible and which are compensated to the creditor that assigned the debt collection, may not be presented to the debtor by mentioning the collection agency as the creditor that assigned the debt collection costs and providing no information about the shares of the various creditors and debts in the costs for the debtor.  Even in retrospective recovery, the collection agency must be able to itemise the amount of collection costs for which different creditors are responsible even if it was no longer obligated to store the documents after five years. If the collection agency fails to follow the above procedure, it cannot confirm that the joint collection costs it collects in retrospective recovery do not include, for instance, the collection costs of a ceased or disputed debt.

The collection costs must be the creditor’s real costs (section 10 of the Debt Collection Act).

Real costs refer to costs incurred from collection measures after the due date (CO).

As expenses due to the debt collection carried out by the contracted agent, the debtor can be demanded to pay at most the amount of money that the creditor has paid or is liable to pay to the contracted agent on the basis of the contract between it and the contracted agent. Therefore, it is not lawful to demand from the debtor, for example, € 50 in remuneration for collection costs based on the measures taken by a collection agency even though the creditor is not obligated to pay this amount to the collection agency based on an agreement between the creditor and the collection agency. If the debtor contests the correctness of the collection costs based on debt collection carried out by the contracted agent, the creditor bears the burden of proof to show that it has actually paid the amount of money that is demanded from the debtor as collection costs or that it is obliged to pay that money to the contracted agent. (HE 57/2012 vp, p. 36)

Therefore, if the contracted agent provides a collection service for which it requires the debtor to pay the expenses which it does not charge from the creditor, the practice is deemed illegal. The law also does not permit a practice in which the collection costs demanded from the debtor seemingly correspond to the costs demanded from the creditor but where the collection costs collected from the debtors are actually also used to cover other services offered by the collection companies (such as accounts ledger and invoice brokerage services). (CO)

As a rule, the creditor is entitled to freely transfer its monetary right to claim receivables to a third party.  However, the creditor’s right to transfer its right to claim receivables is limited by the fact that the recovery of collection costs and the principal sum cannot be separated, which means that the creditor cannot transfer just the outstanding collection costs to a new creditor when the principal sum is still outstanding, for instance. The creditor must also indicate that it has paid or is obligated to pay to the collection agency at least the sum that is demanded from the debtor in collection costs. When the original creditor transfers an outstanding debt to a new creditor, continuing the recovery of collection costs incurred prior to this transfer requires that the original creditor has paid an equal amount to the collection agency or the new creditor has assumed the responsibility for the original creditor’s collection cost debt to the collection agency and has therefore paid or is obligated to pay a sum equal to the costs demanded from the debtor to the collection agency. (CO)

Finnish Competition and Consumer Authority KKV/3018/2014; 26 June 2015: The Consumer Ombudsman found that a condition under which the creditor’s payment obligation to the contracted agent is only actualised once the collection measures targeted at the debtor have been successful does not violate section 10 of the Debt Collection Act. However, the creditor’s payment obligation to pay a collection fee must be valid for as long as the collection cost is demanded from the debtor.

The Consumer Ombudsman emphasised that the purpose of the legal amendment has been to clarify the grounds for the debtor’s responsibility regarding the costs and the creditor must be able to ultimately prove that the debtor is not demanded to pay any collection costs beyond what the creditor is obligated to pay the contracted agent for debt collection. The creditor must be able to always clearly demonstrate how much it has paid or is obliged to pay to the contracted agent in compensation for carrying out debt collection.

5.1 No unnecessary costs should be incurred for the debtor

It is in violation of good collection practice to impose unreasonable or unnecessary costs or unnecessary harm to the debtor (section 4 (2) (2) of the Debt Collection Act).

Payment reminder, payment demand or payment plan costs must include compensation for any work related to them. It is therefore in violation of the Debt Collection Act to demand from the debtor as separate collection costs any remuneration for regular investigation work required in carrying out the assignment or, for example, the transfer of the debt from the creditor to the collection agency or from active recovery to retrospective recovery. (CO)

Regional State Administrative Agency for Southern Finland 11969/2016, 24 November 2017: A collection agency had justified a € 5 cost demand by arguing that the letter had been used to inform the debtor about the transfer of the outstanding debt to the collection agency’s retrospective recovery unit and a resulting change in contact details. A transfer of an outstanding debt between units within the collection agency organisation is not valid grounds for demanding collection costs from the debtor for notification concerning this transfer. This matter concerns arrangements made within the collection agency, and the debtor may not be demanded to pay for the costs of notifying him/her of it.

To ensure appropriate operations, the creditor or contracted agent must ensure that the debtor is able to effectively exercise his/her statutory rights also when an outstanding debt is subject to debt collection. One of the significant rights of the debtor under the Debt Collection Act is the right to receive information about one’s debt situation and the right to deny liability for the payment. Any procedures that impair or complicate debtor’s ability to exercise his/her statutory rights are prohibited under good collection practice. Therefore, no extra charges may be collected for the processing of regular consumer complaints, for instance. (CO)

If the debtor denies his/her payment obligations, voluntary collection as defined in the Debt Collection Act may not be continued. In the collection process, it must also be ensured that the debtor may not under any circumstances be sent the next collection letter on a debt he/she has disputed. Any costs incurred due to such collection measures are therefore groundless and may not be collected from the debtor. Regardless of whether the matter concerns the denial of the payment obligation or an inquiry related to the debt relationship, good collection practice requires that the situation with unclear outstanding debt is investigated before taking the following measures. This serves the best interest of both parties. (CO)

Outstanding debts based on the same agreement or otherwise having the same basis must be dealt with together in debt collection to avoid unnecessary expenses. Even if the debt had become due for several outstanding instalments, the unpaid instalments should, as far as possible, be combined into the same payment demand. (HE 57/2012 vp, p. 39)

Outstanding debts of the same creditor with a different basis must also be combined as far as possible in debt collection to avoid unnecessary expenses (see HE 241/2021 vp, p. 6).

Helsinki Court of Appeal 6 September 2012/2357: Six different outstanding debts collected from A had the same creditor. The bases of the receivables were similar. They had become due on two consecutive days, which led to the conclusion that they had occurred at the same or nearly same time. Also considering that the payment demands for each of the six receivables had been sent on the same days, the Court of Appeal considered that the receivables could have easily been combined in letter collection. Combining the demands could have been reasonably required at least for those receivables that shared the same due date. The company was considered to have imposed unnecessary costs referred to in section 4 (2) of the Debt Collection Act to A as far as the collection of the receivables sharing a due date had not been combined.

Even if there had been grounds for not combining the debt collection on a single payment demand but the measures related to the collection of the different receivables are actually taken jointly in a manner that is apt to reduce the amount of work and costs caused by the collection measures, this must be taken into consideration in the amounts of collection costs demanded from a debtor. (CO)

Regional State Administrative Agency for Southern Finland 11730/2019, 02 April 2020: A collection agency was collecting eight receivables of a single creditor from the same debtor. The receivables were not related to the same agreement or a so-called continuing debt relationship, but they shared a similar basis. The debts had become overdue within a two-year period, indicating that they had not occurred at the same time or even nearly at the same time. Based on the Regional State Administrative Agency’s view, in this matter, the collection agency cannot be required to combine the receivables as they were transferred to collection.

Years later, the debtor had been sent a separate payment reminder on said receivables of the same creditor on the same day. Separate collection costs were demanded for each payment reminder. According to the Regional State Administrative Agency’s view, as these were the same creditor’s receivables demanded from the same debtor with similar grounds, this was apt to reduce the work required from the collection agency in performing related collection tasks. The Regional State Administrative Agency considered that the collection agency had caused the debtor unnecessary and unreasonable costs by demanding separate collection costs for eight receivables of the same creditor for each letter even though the letters had been drawn up at the same time.

Unnecessary costs caused to the debtor also include costs that are due to the sending of several payment reminders to him/her in short intervals (HE 199/1996 vp, p. 12).

Unnecessary costs are also caused when, during the same day, the debtor is sent, with the confirmation of the balance he/she has requested, a separate collection letter related to the same debt or, when the debtor asks for up-to-date information about his/her debt situation, he/she is informed about the debt balances with new cost-incurring collection letters. (Consumer Ombudsman )

The debtor is not liable to pay costs which are caused by the collection activities aiming at voluntary debt payment by the debtor and which are initiated when the matter is still pending at court. (HE 57/2012 vp, p. 31)

A responsible attitude towards payment arrangements must be taken in debt collection. It could be regarded as incurring unnecessary costs if the costs for making a payment plan are collected from the debtor when the creditor or the contracted agent makes the payment plan while failing to confirm, based on sufficient information, that the debtor will probably be able to pay the outstanding debt according to the payment plan. (HE 57/2012 vp, p. 29)

For example, this may be the case when the debtor has no possibility to pay the instalments according to the plan because their ability to pay only suffices for covering other enforced debt collection of which the creditor or contracted agent should have been aware. (CO)

Under the Consumer Protection Act (see section 24 (3) in Chapter 5, section 25 (3) in Chapter 8 and section 25 (4) in Chapter 9 of the Consumer Protection Act)), a payment is deemed effected on the date on which the bank or the post accepted the proper payment order from the purchaser.

This principle on the timeliness of a payment made on the due date has been established in consumer law and consumers have adopted it as a rule. The principle reflects the current payment practice in which the creditor and debtor do not meet in practice.

As a result, the procedures and time limits followed in collection must be planned so that under no circumstances may the debtor be sent the next collection letter on a debt he/she has paid at the latest on the due date.

Therefore, unnecessary costs also include costs incurred due to collection measures taken without confirming whether the debtor has paid the debt at the latest on the invoice or collection letter due date. Costs incurred due to such collection measures cannot be recovered from the debtor.

Sometimes the debtor pays the debt after the due date set in the invoice or collection letter but around the time the creditor or the contracted collection agent is sending the payment demand. The debtor’s compensation liability for the collection measures in these situations depends on whether the creditor or the contracted agent had time to carry out collection activities that are within the scope of the debtor’s cost liability before receiving information about the debtor’s payment. The creditor and contracted agent must arrange their activities so that they also receive and check the information on payments made after the due date without delay.

Sufficient payment period and timely processing and allocation of payments serves the best interest of all parties. The cycles of debt collection should also pay attention to the best interest of the debtor. This may also reduce excessive payments and unnecessary work spent on investigating these. (CO)

5.2 Maximum debt collection cost amounts

Under section 10 of the Debt Collection Act, the debtor must compensate the creditor for the reasonable costs arising from the debt collection. In addition to the reasonableness obligations, maximum amounts in euros have been set for costs demanded for regular collection measures for consumer receivables. Reasonable collection costs should not be thought of as being schematically the same as the maximum amounts set by law (see above for section 5 on reasonable costs.).

Actual collection costs may be claimed from the debtor if, due to the higher than ordinary workload required, the debt collection has caused other costs than those referred to in the Act, or the costs have exceeded the maximum amounts provided for in the Act. In such cases, the debtor must be presented with an itemisation of the collection costs demanded and the grounds for them and informed that the costs are higher than the otherwise applicable maximum amounts. However, the maximum amounts may not be exceeded if the receivable being collected is directly enforceable. (section 10 a of the Debt Collection Act).

Collection of costs requires that the time limits for the collection procedure in accordance with the Debt Collection Act have been complied with. Collection costs for a payment reminder sent by the creditor can be demanded if at least 14 days before the debt becoming due an invoice or some other notification about the debt falling due was sent to the debtor and at least 14 days has elapsed from the due date. Or, if a contract stipulates that the receivable must be paid on a specific due date without a separate notice, collection costs may be claimed from the debtor only if at least 14 days have passed from the due date before the payment reminder is sent (section 10 b (1) of the Debt Collection Act).

Collection costs for a new payment reminder or payment demand sent by a professional debt collector can be claimed only if at least 14 days has elapsed from the sending of the previous payment reminder or demand (section 10 b (2) of the Debt Collection Act).

When collecting a consumer debt, at most the following amounts can be claimed from the debtor for the recovery actions (section 10 a of the Debt Collection Act).

• € 5 for a payment reminder delivered in writing or in another durable medium.

The actual costs incurred may be claimed from issuing a payment reminder using other methods. The costs may be charged in accordance with the average actual costs incurred from the reminder method employed. (section 10 a (2) of the Debt Collection Act)

The collection costs claimed from the debtor for the first payment demand by a professional debt collector can, at most, amount to:

• € 14 if the principal sum of the debt does not exceed € 100 or if the debt is directly enforceable (for example, a health centre payment to a public organisation).
• € 24 if the principal sum of the debt is more than € 100 and does not exceed € 1 000
• € 50 if the principal sum of the debt is more than € 1 000

Credit processing costs or other credit expenses are not included in the principal sum (HE 57/2012 vp. p. 36)

For the second payment demand, the creditor can claim at most half of the maximum amount of the costs for the first payment demand.

The amount for payment demand may not exceed € 5 if the debt is collected by a collection agent belonging to the same financial entity as the creditor. (see the definition in  section 2 (1) (2) and (3) of the Act on the Registration of Debt Collectors (411/2018))

If, by the debtor’s request, the due date in the payment reminder is changed, the creditor or the contracted agent can levy a charge for the extension to the payment period of at most € 5 if the time for the repayment of a debt due is lengthened by at least 14 days by the request.

For a payment plan, in a written or electronically storable form for the whole of the remaining debt, that is created jointly by the creditor or a contracted agent with the debtor, the demand for collection costs can at most amount to:

• € 20 if the principal sum of the debt does not exceed € 100 or if the payment plan consists of at most 4 instalments or if the debt is directly enforceable.
• € 30 if the principal sum of the debt is more than € 100 but not exceeding € 1 000 and the payment plan consists of more than 4 instalments.
• € 50 if the principal sum of the debt is more than € 1 000 and the payment plan consists of more than 4 instalments.

The maximum costs laid down in the Act take into account the number of instalments.  This encourages the parties to negotiate for longer payment plans that are more realistic considering the debtor’s ability to pay. The maximum cost is intended to cover all costs related to the payment plan, including

• credit information check
• explanation of the terms and conditions of the payment plan to the debtor
• written or electronic confirmation of the payment plan to the debtor
• sending of letters concerning instalments and
• plan implementation follow-ups and payments to the creditor’s account. (See HE 57/2012 vp, p. 38)

As the maximum amount for a payment plan covers a wide range of work stages and measures related to preparing, administering and following the plan, normal measures related to these tasks is not a special cause for collecting costs exceeding the maximum amount set in section 10 a of the Debt Collection Act. Costs exceeding the maximum amount can therefore not be collected for the payment plan on the basis that the payment plan is long-lasting and contains multiple instalments. (CO)

The maximum cost is meant to cover also usual and minimal changes to the plan, including postponement of an instalment or lengthening of the overall payment period. If the payment plan is substantially changed, the action can be regarded as equivalent to creating a new payment plan on which a separate charge can be levied. (see the detailed arguments in section 10 a of HE 57/2012, p. 38)

Normally, collection costs for the same consumer debt can be claimed at most for two payment demands and at most for two payment plans. Costs can be claimed for more than two payment demands or payment plans only if there has been a special reason for sending them and the collection measures carried out cannot be regarded as unreasonable, particularly when keeping the principal sum of the debt in mind. In that case, the debtor must be presented with an itemisation of the collection activities and the reasons given for the special motive for those activities (section 10 c of the Debt Collection Act).

The expression “same debt” refers to outstanding debts based on the same agreement or otherwise resulting from the same basis. This generally applies also when the debt has become due in several instalments. If for example payments based on the same long-term contract, such as a rent agreement, are in arrears for many subsequent months, the collection process will be dealing with the “same” debt. However, the matter can be otherwise assessed if the receivables based on said contractual relationship have been paid in full at some point and a completely new collection process is later launched. (see the detailed arguments in section 10 c of HE 57/2012, p. 38)

Market Court 290/2019: In the context of the collection of debt instalments concerning consecutive unpaid shipments based on the same order agreement, the Market Court prohibited a collection agency from demanding collection costs for more than one payment demand per shipment and demanding from the consumer debtor collection costs for payment demands following an initial payment demand that were more than twice as high as the costs of this initial payment demand. (MAO:290/2019)

If the debt is directly enforceable or the principal sum is below € 100, only one chargeable payment plan can be made (section 10 c of the Debt Collection Act).

There may be a special reason for sending more than two payment demands, for example:

• the debt has become due in several instalments, and it has not been possible to put all these instalments together into the same payment demand.
• the debtor has intentionally made the debt collection more difficult by giving untrue or misleading information.
• several parties share the same debt, and each of them must be sent an individual payment demand.
• the debtor hasn’t complied with the payment plan, and it is appropriate to inform the debtor about the expiry of the plan and the transfer of the matter to judicial collection process. As a precondition it is required that the payment plan has from the very start been realistic, taking into account what the professional debt collector has known about the debtor’s anticipated ability to pay and what the overall debt situation is.
• sending of a payment demand is necessary to preserve the creditor’s right for example to prevent debt expiration (see the detailed arguments in section 10 c of HE 57/2012 vp, p. 39).

The maximum collection cost amounts also include the portion of value added tax in the cases where the tax can be levied from the consumer debtor (see HE 21/2004 vp, p. 10  and  MT 2001/005).

5.3 Debtor’s overall cost liability

In a voluntary collection of the same consumer debt, the debtor can be levied a collection cost charge amounting at most to (section 10 d of the Debt Collection Act):

• € 60 if the principal sum of the debt does not exceed € 100
• € 120 if the principal sum of the debt is more than € 100 but not exceeding € 1 000
• € 210 if the principal sum of the debt is more than € 1 000
• € 51 for a directly enforceable debt.

Under the Debt Collection Act, debt collection refers to all measures the purpose of which is to make the debtor voluntarily pay the outstanding debt to the creditor. The measures can be carried out by the creditor itself or be debt-collection assignments commissioned by the creditor (section 1 of the Debt Collection Act,  HE 199/1996 vp, p. 10).  As a result, the debtor’s total liability for costs is considered to include payment reminder costs and possible costs resulting from drawing up a payment plan.

The maximum collection cost amounts are undisputable in case of directly enforceable debts. As far as other debts are concerned, the debtor can be demanded to pay the real collection costs exceeding these amounts if the collection has been exceptionally difficult and if the collection measures carried out cannot be regarded as unreasonable, taking into account the principal sum of the debt especially. In that case, a itemisation must be given of the collection fees demanded and the reasons why the costs exceed the maximum amount of the overall cost liability otherwise applied must be given as well to the debtor. (section 10 d (2) of the Debt Collection Act)

6. Allocation of payments in debt collection

6.1 Allocation of assets accrued in debt collection

Assets accrued in debt collection should first be allocated to the interest and only after that to the principal. In collection of a consumer debt, the accrued assets may be allocated to the collection costs and their interest only after the debt and its interest have been paid. (section 11 a of the Debt Collection Act)

The fact that a debt becomes due in several outstanding instalments does not affect the application of the provision. For example, if a policyholder has failed to pay the costs resulting from the collection of a previous policy payment instalment and he/she later pays the principal sum as a new instalment becomes due, the payment must be considered as paying a new policy instalment, not as paying the collection costs.

If an outstanding debt becomes due in several instalments, the order of allocation only applies to the part of the debt that has become due during the period of accumulation of assets. This means that a payment by the debtor may be allocated to the collection costs without this being prevented by the fact that the debtor has not paid a share of the principal sum that has not yet become due (HE 57/2012 vp, p. 41).

In the case of debts becoming overdue in several instalments (e.g. rent, electricity, phone) assets can be allocated to debt collection costs only after all the instalments that are overdue or are just becoming overdue have been paid. Therefore, if some collection costs for the previous instalments remain unpaid and the consumer intends to pay the next due instalment, the payment must first be allocated to the new instalment becoming due and only after that to collection costs. (CO)

6.2 Consumer’s overpayment

Practices that are contrary to good debt collection practice or are otherwise unfair to the debtor must not be used in debt collection (section 4 of the Debt Collection Act). A professional debt collector must also pay attention to the debtor’s rights in its activities (HE 199/1996 vp, p. 11).

A consumer may make an undue payment or pay a sum larger than intended.

An overpayment may be used for paying a debt with the creditor addressed as the recipient of the payment on the same basis without the debtor’s consent if a new instalment of the same basis has become due prior to returning the overpayment. However, it is not allowed to wait for a new instalment on the same basis to become due for the purpose of allocating the overpayment to the new open instalment only later as it becomes due. (CO)

The question of whether accidental overpayments by debtors may be allocated to paying the debtor’s other debts arises from time to time. The debtor has the right to receive a refund for an overpayment he/she has made. The overpayment must be refunded to the debtor without delay.

If the payment cannot be returned without contacting the debtor, the contracted agent must contact the debtor without delay to return the payment. If the debtor has other debts subject to debt collection, the contracted agent may inquire from the debtor, what he/she would like to be done with the overpayment – whether the debtor would like the sum to be returned or allocated to other debts subject to debt collection. In such cases, the debtor must also be contacted without delay. As a rule, the contracted agent may only opt out of refunding the debtor’s overpayment and use this to pay the debtor’s other debts subject to debt collection with the explicit consent of the debtor. When contacting the debtor, attention must be paid to using the contact medium agreed with the debtor. (CO)

In a situation when it is not possible to return the overpayment and the debtor’s explicit wish cannot be determined or when the return costs would be unreasonable in relation to the returned amount, the overpayment must be used for the payment of other debts subject to debt collection based on the debtor’s best interest. (CO)

The creditor or the professional debt collector must return the excess payment made by the debtor without incurring costs to him/her if the payment has resulted from the creditor’s or professional debt collector’s error. A company may collect reasonable costs caused by returning the payment if the error is clearly due to the debtor’s negligence. (CO)

7.  Law enforcement and coercive measures

The Consumer Ombudsman, as a rule, tries to find a negotiated solution if a business or public organization does not follow the provisions of the Debt Collection Act. If necessary, the Consumer Ombudsman initiates the coercive measures that are required in the matter or takes it before the Market Court.

A creditor or a contracted agent who acts contrary to good debt collection practices or a contracted agent who does not comply with the Debt Collection Act concerning the written payment demand to be given to the debtor can be prohibited from continuing that kind of practice or from repeating it or a practice comparable to it. If found necessary, the prohibition can also be applied to a person working for the business. The prohibition, which the Consumer Ombudsman can order or provisionally impose, must be strengthened with a periodic penalty payment unless this turns out to be unnecessary for some reason.

The Consumer Ombudsman may order a prohibition and strengthen it with periodic penalty payments in issues that are not significant for the interpretation of the law or otherwise significant. No appeal by means of complaint is possible against the decision of the Consumer Ombudsman. The party subjected to the prohibition can take the matter before the Market Court within 30 days of having been informed about it. Otherwise the decision will become permanent. The penalty payment set to strengthen the prohibition is ordered by the sentence of the Market Court. In an urgent matter, the Consumer Ombudsman can order a prohibition also on a provisional basis (section 14 of the Debt Collection Act, section 10 of the Act on the Finnish Competition Authority).

Additionally, a penalty may be imposed for the violation of the following provisions under the Act on Certain Powers of Consumer Protection Authorities (see sections 15 and 17 a of the Debt Collection Act):

• Collection of an outstanding debt that has become obsolete by expiration or otherwise ceased (section 4 (3) of the Debt Collection Act)
• acting in violation of the debtor’s right to information (section 4 a of the Debt Collection Act)
• the continuation of voluntary collection after the debtor has denied his/her payment obligation with appropriate reasons (section 4 b of the Debt Collection Act)
• the continuation of voluntary collection after the debtor has appropriately requested suspension of voluntary collection (section 4 c of the Debt Collection Act)
• sending a payment demand that violates the requirements set for the medium and delivery method or prematurely sending a payment demand to the debtor (section 5 of the Debt Collection Act)
• sending a payment demand with erroneous content to the debtor (section 5 a of the Debt Collection Act)
• claiming payment of a consumer debt in court prematurely (section 6 of the Debt Collection Act)
• use of a draft to collect a consumer debt (section 7 (2) of the Debt Collection Act)
• exceeding the maximum collection costs for consumer debts specified for collection measures (section 10 a of the Debt Collection Act)
• sending collection letters subject to a fee too frequently (section 10 b of the Debt Collection Act)
• sending too many payment demands subject to a fee to the debtor without justification or drawing up too many payment plants subject to a fee without justification
• unjustified exceeding of the maximum total costs set per receivable (section 10 d of the Debt Collection Act)
• allocation of funds to portions of a receivable in violation of the order of allocation (section 11 a of the Debt Collection Act)

Additionally, if a registered debt collector acts in violation of the law or good collection practice, the selection of means employed by the Regional State Administrative Authority for Southern Finland in its supervisory activities includes, from the most moderate to the most severe approach:

• drawing attention
• warning
• a temporary prohibition of activities
• removal of the collection agency from the register of debt collectors.

Warnings and sanctions more severe than this are entered into the debt collector register maintained by the Regional State Administrative Authority for Southern Finland.

Breaching good debt collection practice wilfully or in a grossly negligent manner is also regulated under criminal law (section 17 of the Debt Collection Act). A person who intentionally or through gross negligence violates the provisions of section 4, subsection 2, paragraph 1 (provide untrue or misleading information on the consequences of non-payment or on other matters relevant to the debtor) or section 11 (funds collected from a customer have not been kept separate from the assignee’s own funds) shall be sentenced, unless a more severe punishment for the act is provided elsewhere by law, to a fine for a debt-collection offence. (see also HE 199/1996 vp, p. 18).

8. Compensation for erroneous practice and damage

The contracted agent and creditor are liable for any damage caused by conduct of the contracted agent collecting the debt that is in violation of the Act or otherwise incorrect (see section 15 of the Debt Collection Act).

The creditor is responsible for both the contracted agent’s and its own erroneous practice, and the person sustaining the damage can choose from whom he/she will claim compensation. Liability for compensation does not require that the error is wilful or due to neglect. It is sufficient that the practice be erroneous and it has incurred financial costs to the subject of debt collection.

Typically, compensation could be claimed for costs incurred to the debtor from clarification of an insufficient, ambiguous or baseless payment demand, for example, for using the phone or obtaining receipts (HE 57/2012 vp, p. 41).

The contracted agent might have to compensate the costs incurred by the debtor from debt litigation when the agent has not provided the debtor with a payment demand. Liability for compensation might also arise when the contracted agent has demanded the outstanding debt in court before having given the payment demand and the date due and the period for comments mentioned in it have ended. (see HE 199/1996 p. 18)

Apart from the debtor, also others, for example a person being subjected to unjustified debt collection, can demand compensation for the damage sustained.

A creditor who has had to pay compensation for damages due to erroneous practice by the contracted agent has the right to be reimbursed by the contracted agent for the compensation paid (section 15 (3) of the Debt Collection Act).

This guideline was issued in 2/2014 and reviewed in 10/2023