Does debt collection affect my credit score?

Mr Spitz, thank you very much for taking the time to answer my question and for agreeing to an interview. What links you to Riverty Back in Flow and to debt collection?

I have been working for the company since 1983 in various functions, including 14 years as managing director, and I also served on the committees of the professional association of debt collection companies – i.e. the BDIU e.V. in Berlin – for 28 years. Most recently, I was its president for 8 years and have been honorary president of the BDIU for 7 years now. Both in the company and in my work for the association, I have always paid special attention to data protection.

Then I've come to the right place! How is it: do I get a negative Schufa entry just because I received a collection letter?

Debt collection does not automatically mean a negative Schufa entry – it doesn't happen that quickly! In order to approach the topic sensibly, we should perhaps first clarify the terms: What is Schufa? And what does a debt collection agency do?

Pia Zeitvogel interviewing Wolfgang Spitz.

What does a collection agency do?

Okay. I think I can define the collection agency myself. A company delivers something and finds out that the invoice is not paid. As a result, it has an outstanding debt and, as a creditor, tries to get its money from the debtor of the claim. If the company's "receivables management" does not get anywhere, it hires a debt collection agency to further enforce the claim. The collection agency then initiates debt collection proceedings. – Is that about right?

Yes, that was explained very well.

Thank you. And what does Schufa do? Can you please explain that to me?

Schufa Holding AG is the best-known credit agency in Germany. Therefore, an entry with a credit agency is often colloquially referred to as a Schufa entry. However, there are other credit agencies in Germany, such as Creditreform AG, infoscore Consumer Data GmbH or CRIF GmbH.
Credit agencies analyse the payment behaviour of debtors and provide companies with information on the probability with which a new contractual partner will pay their bills on time. This reduces their risk of payment defaults.

That sounds a bit abstract to me. Can you please give me an example?

A landlord, for example, wants to be sure that the rent for his flat is always paid on time. So before signing the tenancy agreement, he has the applicants submit "tenant information" from a credit agency, such as Schufa. If there is no negative entry in the data on the potential tenants, they are very likely to pay their rent on time. If, on the other hand, applicants have negative Schufa entries, this is not so certain.

This means I'm more likely to get the flat if the debt collectors don't report me?

Correct. But debt collection companies are only allowed to submit consumer data to credit agencies under certain conditions. In the European General Data Protection Regulation, the EU GDPR, the conditions for submission are precisely defined. As the name suggests, it applies not only in Germany, but throughout the EU.

In addition, national data protection laws supplementing the EU GDPR apply in the individual EU member states. The corresponding German law is the new version of the Federal Data Protection Act, which became applicable at the same time as the EU GDPR on 25 May 2018 and is referred to as the "BDSG".
The legal framework relevant for the submission of consumer data to credit agencies in Germany is thus para. 1 letter f of Article 6 of the EU GDPR entitled "Lawfulness of processing" in conjunction with subparagraph 2 of § 31 of the BDSG "Protection of commercial transactions in the case of scoring and credit reports".

So the relevant paragraphs can be found in the European General Data Protection Regulation and the German Federal Data Protection Act.
And in which case will a report of my data be triggered?

The submission of consumer data to credit agencies is generally possible if it is necessary to protect the legitimate interests of the submitting party – e.g. us as a debt collection service provider or the claim holder – or of a third party and if these interests outweigh the interests of the consumer in protecting their personal rights.

Since the submission serves not only to protect bona fide business transactions from payment defaults, but also in particular to protect the consumer concerned from overindebtedness, the weighing of the interests of both sides will usually speak in favour of the admissibility of a submission.

Aha, here the different interests are basically weighed against each other. Are there any other requirements for submission?

Wolfgang Spitz being interviewed by Pia Zeitvogel.

Further requirements

Yes, there are further requirements to be met so that a submission becomes admissible. These prerequisites are laid down in detail in § 31 (2) BDSG.
For example, a submission is admissible if the claims have been recognised by the consumer, if they have already been titled by a court decision or in the context of judicial dunning proceedings, or if the conditions for termination without notice due to payment arrears existed in the case of an ongoing contract.

Another – very important – prerequisite for the admissibility of a submission of consumer data to credit agencies is also given if the payment has already been reminded in writing at least twice, at least four weeks have passed since the first reminder, the consumer has been informed of the impending submission to a credit agency and the claim has not been disputed, but has still not been paid.

That was a lot of input. Can you please summarise it briefly for me?

Of course with pleasure. In summary, we can state that the submission of consumer data to credit agencies is by no means left to the discretion of the submitting party, but rather may only take place under strict, legally defined conditions – which is ultimately meant to protect the personal rights of the consumers concerned.

I understand: this is all regulated so precisely in order to do justice to all sides – the protection of the companies against payment defaults and the protection of the personal rights of the people concerned.
But now I have another question: Are debt collection companies allowed to threaten me with a Schufa entry?

No debt collection agency may threaten you with a Schufa entry. As already mentioned, consumers must be informed of the impending submission before their data can be submitted to a credit agency. By informing the defaulting consumer accordingly, the agency intending to make a submission to a credit agency under certain circumstances, thus merely fulfils a statutory obligation which it has for such cases according to § 31 (1) letter c BDSG.
Moreover, such a reference corresponds to the BDIU's Code of Conduct, which has been in force for all its member companies since 1 October 2021 and can be found on the Internet at https://www.inkasso.de/code-of-conduct. There, § 28, among other things, states the following:
"The submission of claims data to a credit agency must have been indicated before the actual submission. [...]
Insofar as measures of debt collection do not have to be indicated beforehand, these shall nevertheless be announced unless there is a risk that the purpose of debt collection will be thwarted."

So the debt collection agency is obliged to issue a notice – but what is the difference between this and a threat?

The notice must remain within a factual framework, which also results from § 29 of the BDIU Code of Conduct. It states there:
"Notices, announcements and threats that may give the impression that a legal defence of the debtor is excluded even in the case of unfounded claims are inadmissible. This is particularly the case if the impression is conveyed that

payment of the unjustified claim is the only way to avert the announced measure;
even a successful legal defence would have disadvantageous legal consequences for the debtor;
raising defences and objections would be impossible or have extraneous disadvantages."

Riverty Back in Flow's legal predecessor was a key member of the BDIU e.V. when it was founded in 1956; over the past decades we have played an active role in the further development of professional law for the debt collection industry. It therefore goes without saying that Riverty Back in Flow complies with the applicable laws as well as the code of conduct laid down by the BDIU for its member companies. For this reason, we reject inappropriate notices, announcements and threats.

Good, that means: there must be a notice of a possible submission, but there must not be a threat.

Exactly right.

And how do I find out if I already have a negative entry?

Since 25 May 2018 – i.e. the date on which the EU GDPR and the new version of the BDSG became applicable – every consumer has the right to request free information about their personal data from any agency, including credit agencies, provided that data about them is stored there. The previous restriction, according to which such information could only be requested free of charge once a year, is no longer provided for in Article 15 EU GDPR.

However, this does not mean that the right to free information is now unlimited. The EU GDPR allows the refusal of information or the provision of information only against payment, especially if data subjects request information at unreasonably short intervals.

So asking once should be OK in any case. But enough time should have passed before the second enquiry.
How long do the collection agency entries remain with Schufa?

The deletion periods that were previously regulated by law no longer apply since 25 May 2018. Instead, the credit agencies have agreed on deletion periods with the data protection supervisory authorities, but these do not differ significantly from the previous ones.
As a rule, Schufa stores data for three years. Deletion now takes place on a daily basis instead of – as before – regularly at the end of the year.

And what can I do ...

... if I already have a Schufa entry because of debt collection?

The best thing is to settle the matter as quickly as possible. That means: to pay as quickly as possible if the claim is justified, or to contact the collection agency immediately if the claim is unjustified. In any case, you should deal with the matter directly.

When does debt collection lead to a Schufa entry?

You might also like