Debt collection fraud: Unjustified reminders

Fraudsters shamelessly exploit the fear of debt collectors to make a quick buck. The scam: consumers are lured into a subscription trap on the Internet and then asked to pay. Those who do not pay receive legally highly dubious or even criminal reminders.

By involving dubious debt collection agencies or law firms, additional massive pressure is exerted.

Subscription traps: Mail from dubious debt collection agencies or lawyers

Most private individuals never have anything to do with a court personally in their lives. And it is only very rarely that they receive a reminder. That is why most people react shocked and frightened to dunning letters in which debt collection agencies announce drastic coercive measures up to and including wage garnishment.

Another effect is the threat of an avalanche of costs, which makes an initially rather small amount of money grow into a supposedly immeasurable amount. Deeply insecure and intimidated, claims are therefore still paid even if they are considered unjustified.

Shady providers take advantage of this circumstance to enforce legally highly dubious or even baseless claims against consumers. By involving debt collection agencies - or occasionally lawyers – massive pressure is put on the victims to profit from their helplessness or despair.

It is not only that companies from other EU countries assert their claims through German debt collection agencies; foreign debt collectors are now also romping around on the German market.

What are debt collection agencies?

Debt collection agencies are nothing more than commercial debt collectors. They are paid by their clients to collect money.

What are debt collectors allowed to do?

Although debt collection agencies give the impression that they can seize an account or sic bailiffs on debtors, they are by no means authorised to do so. This would first require a legally binding court ruling.

When do I have to bear the collection costs?

Whether and to what extent the costs of the collection agency can be passed on to the consumer depends on the circumstances of the individual case. In principle, however, there is no obligation to pay if you can be sure that you have no contractual relationship with the person on whose behalf a debt is being collected.

Reminder from debt collection agency or lawyer

Keeping a cool head is the most important thing. Even before you clarify whether the claim asserted against you is justified, it is important to check whether the debt collection agency or the lawyer has even received the order to send you a reminder for the third-party claim.

Simply claiming to have been commissioned to do so does not meet the legal requirements at all. Instead, proof must be provided by means of a written power of attorney which also identifies the issuer with a legible signature. This written power of attorney must be presented in the original. A photocopy or a "certified copy" by a lawyer can be rejected as insufficient. It is also not sufficient if the lawyer "assures the proper authorisation".

Your first (and possibly only) letter to the other side could, for example, be worded as follows:

"You have not properly proven your power of attorney and have not presented me with an original written power of attorney that also shows the name of the issuer. For this reason alone, I reject your letter."

It is astonishing how often the matter is settled by asking for power of attorney, because it becomes too troublesome for the debt collectors and they are probably more after the quick buck.

What should I do if I continue to receive reminders?

You can give such attrition tactics, which are often combined with the threat of further coercive measures or expensive "settlement offers", the cold shoulder.

Provided: You have familiarised yourself with the legal situation and given the other party the reasons for your refusal to pay. After that, you do not need to comment any more. Anything else would be a wasted effort anyway, because the other side is not interested in your opinion, but in your money.

The debt collection agency threatens with a Schufa entry

In order to lend weight to their demands, the operators of subscription traps often threaten to make an entry in Schufa.* Those affected need not be misled by this, because there are many reasons why this threat is not true.

For one thing, the Schutzgemeinschaft für allgemeine Kreditsicherung – Schufa’s full name - is active exclusively for its members, and it can be assumed that the operators of subscription traps do not belong to this circle. For another, the disclosure of personal data is only permitted with the prior consent of the customer, in accordance with the provisions of data protection law.

Because of the usually harmful consequences of a negative Schufa entry, the threat of reporting to Schufa could even be regarded as attempted extortion under criminal law if the demand for money is unjustified from the outset.

* SCHUFA Holding AG is a company acting as a central place where information about you (as a consumer) is sourced from utility suppliers, banks, internet providers & more.

The company will track all bills or fines over time. Using this raw data and parsing it through an algorithm of their own, they create and record a credit rating score for all German residents.

When people say “SCHUFA”, they mean the record held by the company.

To the Schufa website

The order for payment and the judicial order for payment procedure

If legal dunning proceedings have been initiated against you, you must take action.

It would be more than reckless to simply ignore the court order to pay. However, some debt collection agencies also try to confuse you in this context. Therefore, you should know the following about the legal dunning procedure and possible further developments.

An order for payment is served by a court. It is a form filled out by the other party, which is forwarded to you by the court without a detailed legal examination. Therefore, the service of the court order for payment does not mean that the asserted claim is legal. Ultimately, a judicial officer at the court has merely checked whether the application form for a court order for payment has been filled in correctly.
You should read the documents sent by the court with the order for payment very carefully, seek legal advice again and decide whether to lodge an objection.

The legal time limit for this is 14 days. In the case of a European order for payment, the time limit is 30 days.