Debt Recovery in Europe

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A debt collection is a type of financial account that’s been sent to a third-party debt collector. A debt recovery process is a set of procedures used in order to recover overdue claims from the debtor. The problem of debt collection exists in all businesses and regions and has a remarkable effect on a business’s economic situation.

Debt Collection in Lithuania

In Lithuania, debt recovery’s first step is also called ‘out of court phase’. This is because the debt collector is not bound to take any legal stand at this point. Instead, the debt collector tries to convince the debtor to pay voluntarily. This is achieved through communication with the debtor through, for example, phone and dunning letters.

European Statistics

Recent statistics showed that Western Europe stands out with the highest number (17) and share of countries (88%) at a notable collection complexity, with only two countries not belonging to the same category (Italy and Greece).

This apparent homogeneity should not be misleading since this often results from uneven sources of complexity from one country to another. For instance, dealing with debtors who have entered insolvency proceedings is more complex in Germany than in Sweden despite the fact they have the same collection complexity score.

In Eastern Europe, there are twice as many countries with a ‘Very High’ complexity than with a ‘High’ level, and Russia which belongs to the five most complex country of the world.

Issues highlighted in Europe

It has been observed that a legislative vacuum and a lack of consumer protections are encouraging bad practices in debt collection in Europe. The absence of integrated rules creates an uneven playing field leading some debt collectors to employ more aggressive behavior in order to increase already remarkable profitability. This leaves consumers vulnerable to harassment, abuse and violations of their privacy by telephone, email, text and other means. 

Solution to the Problems

Debt collection practices also need to be regulated at European level. This should prohibit behavior or practices that are likely to negatively impact on debtor privacy, human dignity or are likely to mislead them. Debtors must also be properly informed of their rights and given the right support.

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