What are debt collection agencies and how do they work?

Debt collection agencies are companies that act as intermediaries or new creditors in the process of recovering debts. They most often appear when a person has unpaid obligations to banks, non-bank financial institutions, telecoms, or service providers.

How does a collection claim arise?

The legal basis is usually an assignment – a contract for the transfer of a claim (Article 99 et seq. of the Obligations and Contracts Act, OCA).

Through assignment, the original creditor (e.g., a bank) transfers its rights to another company – the collector.

The debtor’s consent is not required, but they must be notified. If the debtor is not notified, any payment made to the original creditor is valid and releases them from liability.

What rights do collectors have?

The collector assumes the position of the old creditor – acquiring the same rights, but no more. This means that they:

• cannot impose garnishments or liens on their own;

• cannot issue court decisions;

• cannot apply coercion outside what is provided by law.

To collect payment, the collector must either persuade the debtor to pay voluntarily or initiate court proceedings (e.g., payment order under Articles 410–417 CPC), which may lead to enforcement proceedings by a bailiff (Article 404 et seq. CPC).

What are the debtor’s obligations?

The debtor must pay the debt if it is valid and due. In practice, common issues arise:

• expired statute of limitations (5 years general, 3 years for interest and periodic payments);

• lack of evidence of the debt itself;

• unlawful fees or penalty clauses.

In such cases, the debtor has the right to challenge in court or demand evidence.

What collectors cannot do

Collectors often use aggressive practices – repeated calls, threatening letters, or references to “arbitration awards.” This contradicts:

• the Consumer Protection Act – prohibition of unfair commercial practices;

• the Criminal Code (Art. 143) – extortion, if there are threats of unlawful consequences;

• the Personal Data Protection Act – when personal data is used unlawfully.

If the debtor is pressured, they may file a complaint with:

• the Consumer Protection Commission;

• the Commission for Personal Data Protection;

• the Prosecutor’s Office or the police (in case of threats).

Conclusion

Debt collectors are not courts and have no right to exercise coercion on their own. They can only seek payment voluntarily or through legal proceedings. Every debtor has the right to request evidence of the debt, invoke the statute of limitations, and file complaints against unlawful actions.

If you face such a case and need professional protection, it is best to consult a lawyer specializing in civil and contract law.