Debt Collection from Individuals vs. Businesses: The Differences
The Danish rules on reminders and debt collection are not the same when the debtor is a consumer as when it is a business. Here are the key differences you need to know.
Why is there a difference?
Danish law protects consumers more than businesses. This also applies when a bill is not paid. Many rules are the same, but there are important differences in what you may charge, what you can agree and who is liable. If you do not know the differences, you risk charging fees you are not entitled to, and the claim being disputed.
What applies to everyone
- Debt collection notice: before the case is sent to debt collection, the debtor must receive a letter of demand with all the necessary information and a deadline of at least 10 days (section 10 of the Debt Collection Act).
- Reminder fee: at most DKK 100 per reminder, no more than 3 reminders and at least 10 days apart (section 9 b of the Interest Act).
- Late-payment interest: the reference rate plus 8 percentage points per year (section 5 of the Interest Act); the same markup for consumers and businesses.
- Debt collection costs: caps under the executive order on out-of-court collection costs.
- Payment order: can be used for undisputed claims up to DKK 100,000, whether the debtor is a consumer or a business.
When the debtor is a consumer
- No DKK 310 compensation: the fixed compensation only applies between businesses.
- Limited freedom of contract: the Interest Act's rules cannot be departed from to the consumer's detriment (section 7). So you cannot agree a higher interest rate or stricter terms than the law.
- Instalment plans: if you offer a consumer payment in instalments with interest or fees, the agreement may fall under the Danish Credit Agreements Act, with special requirements. Read more about instalment plans.
- Supervision: the Danish Consumer Ombudsman enforces the rules on good debt collection practice and letters of demand and can intervene in breaches.
- Disputes: disagreements about a consumer purchase can in many cases be handled by a complaints board, such as the Danish Consumer Complaints Board.
- Personal data: information about a private individual's debt is personal data, and you must process it in line with data protection rules.
Expert tip: Check the customer type before you send reminders
Mark in your accounting program whether the customer is a consumer or a business. Then reminders can automatically include the fixed compensation for business customers, and leave it out for consumers.
When the debtor is a business
- Compensation: you can claim fixed compensation of DKK 310 for late payment (section 9 a of the Interest Act).
- Freedom of contract: businesses can to a greater extent agree their own terms, such as a different interest rate, as long as the agreement is clear and not unreasonable.
- Payment terms: payment terms of more than 30 days require your express acceptance as the creditor (section 3 a of the Interest Act).
- Complaints about defects: a business customer must as a rule complain about defects without undue delay.
Who is liable for the debt?
It is crucial to know who you actually have a claim against:
- Sole proprietorship (enkeltmandsvirksomhed): the owner is personally liable for the business's debts.
- Companies (ApS and A/S): as a rule only the company is liable. If the company goes bankrupt, you normally cannot claim the money from the owner, unless the owner has given a personal guarantee.
- General partnerships (I/S): the partners are as a rule personally and jointly liable.
You can see the company form in the CVR register. Read how to check a Danish company in the CVR register.
Expert tip: Ask for a guarantee on large credit to companies
If you give large credit to a small ApS, consider asking the owner for a personal guarantee. Without one, you may be left with a lost claim if the company goes bankrupt.
When the debtor cannot pay
If a business cannot pay, it may end in restructuring or bankruptcy. A private individual can instead apply for debt relief (gældssanering) at the bankruptcy court, where the debt may be reduced or written off.
Getting started
Review your reminder templates so they distinguish between consumers and businesses, and check who is liable before giving credit. Through InkassoHurtig you can get no-obligation quotes from police-authorised debt collection agencies and lawyers. This content is general information and not legal advice.