Debt collection without dunning - how does that work?

It may come as a surprise, If a consumer receives a letter from a collection service provider without previously having been reminded by their original business partner. Many customers ask: debt collection without dunning, is that even legal? The answer is: under certain conditions, a collection instruction without dunning by the creditor is possible.


Debt collection without dunning: when is it a collection case?

An undisputed and due receivable of the creditor is the only necessary condition for a collection agency to be appointed. This may have been preceded by delivery of goods or a service contract. If the invoice is due and the customer does not pay, a company may outsource the receivables management to a service provider and appoint a collection service. This company will write to the debtor and notify him about the instruction to collect.


The general rule: no debt collection without dunning

Normally collection agencies will only be appointed in case of a default in payment. In most cases, the debtor has already received one or more dunning reminders from the creditor. The first dunning can also be referred to as a payment reminder. It is important that this is a clear request from the creditor for the debtor to meet his payment obligation. Otherwise, it is a payment reminder without legal consequence: a polite reminder letter. In most companies, it is common to send up to three creditor reminders before receivables management is handed over. However, there is no legal obligation to do so.

Usually, a collection instruction is only given if a debtor has failed to settle an outstanding receivable in spite of at least one reminder and has not responded to the letter by his creditor. No later than with the first dunning letter, the debtor is in default of payment. This has various consequences, especially with respect to the damages caused by default.


Default in payment and debt collection without dunning

The debtor can also be in default without any dunning by the creditor. A fixed payment term or date may be stipulated on the invoice or the contractual agreement already. If the debtor has not paid by this date or before expiry of this deadline, he is in default; this requires no separate payment reminder from his business partner. This may result in debt collection without dunning.

Furthermore, the debtor is in default at the latest 30 days after receiving the invoice. This statutory regulation applies unless otherwise agreed upon. Even in this situation, the defaulting can lead to debt collection without any creditor dunning. However, this must be explicitly noted on the invoice to the consumer.


Who bears the costs for debt collection without dunning?

Whether the debt collection was preceded by dunning from the original business partner is not a determining factor in terms of cost coverage. Rather, the determining factor is the default: was the debtor already in default of payment at the time of the collection letter? Being in default entails damages caused by default. The debtor must reimburse his creditor with these. Any financial disadvantages incurred by the creditor as a result of the debtor defaulting must be reimbursed by the debtor. This includes the costs of debt collection - with or without dunning.


What should you do in the event of debt collection without dunning?

Debt collection without creditor dunning proceeds in exactly the same way as debt collection with creditor dunning. After the first letter from the collection agency, the debtor should first verify the receivable asserted to him. It is entirely possible that he had already paid the invoice before the letter from the collection agency was received. Even in this case, he should not ignore the payment request by the collection agency, but should state his position via phone, letter or email.

If the receivable is still outstanding, the debtor should settle it as soon as possible and transfer the appropriate amount to the specified account number.