Inkasso (debt collection) in Germany – don’t miss these important details!

Debt Collection (Inkasso) in Germany

Introduction

Debt collection, known in German as Inkasso, is the process in which specialized agencies are tasked with recovering outstanding amounts from debtors who have not paid their invoices. Debt collection usually involves several stages, starting with simple payment reminders and potentially ending in formal legal proceedings.

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When is a debt collection agency involved?

Companies usually instruct a debt collection agency when customers fail to pay their invoices on time. Invoices typically specify a payment period, such as 14 or 30 days. If payment is not made within this time, the company may send a reminder. If the problem continues, a debt collection agency can be appointed.

Example:

Imagine you bought a mobile phone for 600 euros and did not pay the invoice within 30 days. First, you will receive a payment reminder. If you still fail to pay, the company may assign a debt collection agency to recover the outstanding amount from you.

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How does a debt collection agency work?

When you receive a letter from a debt collection agency, this usually means that the agency has been instructed to collect the outstanding amount. The claim often consists of:

• the original amount owed,

• any additional reminder fees (Mahnungskosten),

• collection fees (Inkassokosten).

If the debtor does not respond, the agency may take the matter to court to have the claim legally confirmed (titled).

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What happens if you still do not pay after Inkasso notices?

If the debt remains unpaid even after receiving letters from the collection agency, the situation can become more serious:

1. Legal action:
   The collection agency can initiate legal proceedings against the debtor. This includes filing an application for a court order or bringing a lawsuit to recover the outstanding amount.

2. Wage garnishment:
   If the court rules in favour of the collection agency or the creditor, part of the debtor’s wages can be garnished. This means that a portion of the salary will be deducted by the employer and paid directly to the creditor before the debtor receives their pay.

3. Impact on your credit record:
   Failure to pay debts can lead to negative entries with credit agencies such as Schufa. This can seriously weaken your creditworthiness and make it harder to obtain loans, mobile phone contracts or even rental agreements in the future.

4. Effect on your financial situation:
   Collection costs, court fees and default interest can accumulate over time, increasing the total amount owed and worsening the debtor’s financial situation.

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What should you do if you receive a collection letter?

1. Read the letter carefully:
   Check all the details thoroughly. Make sure that you actually ordered or received the product or service and that the amount claimed is understandable.

2. Verify the claim:
   If you are sure that you did not purchase anything or that the claim is unjustified, you can inform the collection agency in writing and dispute the claim. It is recommended to use template letters from the consumer advice centre (Verbraucherzentrale) to send a formal objection.

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How to distinguish between a genuine and a fake collection letter

A genuine and lawful collection letter should contain at least the following information:

• the name of the original creditor (Gläubiger),

• details about the underlying service or product,

• the payment deadline (Zahlungsfrist), i.e. by when the amount must be paid.

If this information is missing or the letter appears suspicious, you can report the collection agency to the competent supervisory authority (Aufsichtsbehörde) and seek advice from a consumer protection organisation.

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Conclusion

Debt collection (Inkasso) is a legal procedure that individuals may face if they fail to pay their invoices. Debtors should be aware of their rights, always check whether a claim is justified and take collection letters seriously. When in doubt, it is advisable to contact a debt counselling service or the consumer advice centre at an early stage to clarify the next steps.

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• The team of writers and editors on the website strives to provide accurate information by conducting thorough research and consulting multiple sources when preparing articles. Nevertheless, errors may occur or information may be included that is not fully verified. Therefore, please regard the information in the articles as an initial point of reference and always consult the competent authorities and professional bodies for definitive and binding information.