Good Debt Collection Practice: What Agencies May and May Not Do
The Danish Debt Collection Act sets clear limits on how debts may be recovered. Learn the rules on authorisation, good debt collection practice and fees, so you choose the right partner and avoid problems.
What is good debt collection practice?
The Danish Debt Collection Act (inkassoloven) requires all debt recovery to follow good debt collection practice (god inkassoskik). This means debt collection must not expose the debtor to unreasonable harm, unnecessary inconvenience or pressure, and the debtor must be given correct and clear information about the claim. The rules apply to debt collection agencies and lawyers, but the principles are also worth following if you chase your own customers.
For Danish SME owners the rules matter for two reasons: you need to be able to choose a reputable partner, and in practice your reputation is on the line when someone recovers debts in your company's name.
Authorisation from the Danish National Police
Debt collection on behalf of others may only be carried out with authorisation from the Danish National Police (Rigspolitiet) (section 3 of the Debt Collection Act). Lawyers are exempt, as they are subject to their own rules. To be authorised, a company must among other things provide security, keep client money separate from its own funds in a client account, and have an audited annual report. Authorisation is granted for a limited period at a time.
The National Police supervises authorisations, while the Danish Consumer Ombudsman (Forbrugerombudsmanden) enforces the rules on good debt collection practice and letters of demand.
Expert tip: Check the authorisation before you sign
Always ask the debt collection agency for documentation of its authorisation, or check with the Danish National Police. Also ask how money paid in is handled: a reputable agency keeps it in a client account and pays it out to you on agreed terms.
Correct information and the letter of demand
Before any recovery steps are taken, the debtor must have received a letter of demand with all the information needed to assess the claim and a deadline of at least 10 days from sending (section 10 of the Debt Collection Act). The debtor must be able to see who the creditor is, what the claim concerns and how the amount is calculated, including interest and fees.
If the debtor objects to the claim, the agency must deal with the objection and may not simply carry on collecting as if nothing had happened.
What breaches good debt collection practice?
The Act does not contain an exhaustive list, but the following are typical examples of conduct that breaches good debt collection practice:
- Threats or misleading information about the consequences of not paying, for example threatening legal action that is unrealistic or not intended
- Undue pressure or harassment, including frequent or unpleasant contact and contact at unreasonable times
- Involving third parties (for example the debtor's employer, family or neighbours) in the case
- Charging fees or costs without a legal basis, or above the set caps
- Failing to explain how the claim is calculated
The Consumer Ombudsman can intervene in breaches, and serious or repeated breaches can affect a debt collection company's authorisation.
Expert tip: Agree the rules of contact
When you sign up with a debt collection agency, agree how your customers will be contacted, how often you receive status updates, and when the case must come back to you before legal action. This protects your customer relationships and gives you control over what happens in your company's name.
Fees and debt collection costs
Fees and costs are regulated by the Danish Interest Act (renteloven) and the executive order on out-of-court collection costs:
- Reminder fee: at most DKK 100 per reminder, no more than 3 reminders, at least 10 days apart (section 9 b of the Interest Act)
- Fixed compensation of DKK 310 for late payment between businesses (section 9 a)
- Debt collection costs when using an agency or lawyer: no more than the amounts set by the executive order according to the size of the claim. For claims arising after 1 July 2024 the cap is for example DKK 500 excl. VAT for claims up to DKK 1,000, DKK 2,700 excl. VAT for claims of DKK 25,001–50,000, and for claims over DKK 500,000, DKK 7,700 plus 1% of the excess
Example: a customer owes DKK 30,000. After a correct letter of demand, the debtor can be charged at most DKK 2,700 excl. VAT in debt collection costs under the table, on top of interest and any lawful reminder fees. If more is charged, the debtor can reclaim the excess.
Your rights as a creditor
As the creditor you are entitled to regular information on the status of the case and to have payments passed on to you as agreed. You should also have insight into the steps the agency takes before, for example, filing a payment order or a lawsuit, as these can involve costs for you.
How to choose a reputable debt collection agency
- The agency holds valid authorisation from the Danish National Police (or is a law firm)
- The pricing is clear and in writing, including what you pay if the claim cannot be recovered
- The agency can explain how it complies with good debt collection practice
- You receive regular reporting, ideally digitally
- The agency has experience with your type of customers and claims
Conclusion
Good debt collection practice is a legal requirement, not a recommendation. By choosing an authorised partner and knowing the rules on letters of demand, fees and conduct, you make sure your claims are recovered effectively, without damaging your reputation.
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.