The Chamber saw several bottlenecks in the credit collection draft act

The Ministry of Finance has supplemented the Draft Credit Collection and Purchasers Act to better regulate the activities of collection agencies and related persons. For example, according to the proposed changes, credit collection agencies have to apply for authorisation from the Financial Supervision Authority and are subject to a minimum capital requirement of EUR 25,000. The Chamber is not convinced that all the measures contained in the draft are necessary to regulate the area and also drew attention to them in its opinion.  

The main objective of creating the new law is to transpose EU Directive 2021/2167, which regulates the activities of collection agencies that collect and redeem debts arising from bank loans (both consumers and businesses). In addition, the aim is to ensure better protection for debtors and their interests, since the Ministry considers that the activities of debt collection companies are very limited in the present case and that, therefore, sometimes non-legitimate methods of debt collection may be used. 

The Chamber does not support default interest regulations in the Law of Obligations Act  
The persons drafting the Act wish to amend the rules on default interest established in the Law of obligations Act in such a way that the creditor may, in the event of delay in payment of the payments due from the consumer, demand default interest which may be up to twice the interest rate prescribed in the consumer credit contract but which in no case may be higher than the upper limit of the annual percentage rate provided by law, which at the moment is 16.72%. The draft also states that it does not preclude or restrict the right of the creditor to demand compensation from the consumer for damage exceeding the default interest. An agreement which provides for a higher rate than the above or an agreement which allows the consumer to demand, in particular, a deposit or contractual penalty in the event of delay in payment shall be void pursuant to the draft.

The Chamber does not support the above amendment and we consider that there is no need to change the current situation. We pointed out that the issue of the calculation of interest for late payment goes beyond the directives to be transposed by the draft, and it already needs a broader debate in the society.  

One Member of the management board is sufficient for the credit collection 
The drafters of the draft legislation wish to provide that the management board of a credit collection agency must have at least two members unless the articles of association prescribe a larger number of members. The Chamber of Commerce did not agree with this because there are several small credit collection agencies operating in Estonia, the management of which does not consist of so many people, and therefore these companies would have to increase the number of members of the management board or terminate their activities as a credit collection agency. In our opinion, it is also sufficient for the credit collection to have only one member of the management board.  

The draft act must include an ex-post impact assessment obligation
The Chamber considers it important that the draft includes a provision for ex-post impact assessment as it can prevent any negative effects that the draft may have. The ex-post evaluation provision has been removed from the draft, which raised questions for the Chamber, as we had explained in our previous opinion why an ex-post impact assessment was necessary. While it is mentioned in the draft that an ex-post evaluation is planned, for the sake of certainty the ex-post evaluation should also be provided for in the draft act.

The bill should not address loans not in default
Upon examination of the draft, it can be concluded that credit management activities also include dealing with loans not in default, although the draft should only concern dealing with loans in default. Therefore, we proposed to clarify the wording of the draft in such a way that it would be understood that credit management activities are limited to dealing with loans overdue.

Statistics Estonia should not have the right to require sensitive data from a credit institution
The Ministry wishes that a credit institution is required to disclose bank secrecy to Statistics Estonia for the performance of the functions arising from the Official Statistics Act if the client has given consent to the credit institution. The Chamber raised the question of customer consent, whether banks are required to seek customer consent at any time after the change takes effect, or whether banks are left with discretion on the issue of consent, when to ask and when not. It also raised questions about how to ensure that, as a result, credit institutions are not subjected to any additional regular or one-off reporting burden.

We are also concerned about the fact that Statistics Estonia is given the right to request bank secrets from a credit institution, because it sets a precedent where it is later becoming increasingly difficult to explain why it or another public authority cannot access sensitive information. We therefore proposed deleting this provision from the draft.

Under the draft act, the law is expected to take effect on 1 March 2024, but the Chamber proposed extending the law's entry into force until 1 March 2025. According to the Chamber, it is worth taking into account that creditors and debt collection agencies need to improve their IT technology solutions and this cannot be done in a few months because IT technology solutions are complex.

A review of the draft law on credit collection agencies and buyers can be found here.