General information about debt collection
Additional general information about the law governing the collection activities, as well as any matters that one comes across in the course of the collection process can be found below.
What is Debt Collection?
The need for debt collection arises when an invoice has not been paid by its due date.
The term ‘debt collection’ covers all measures which targets to conduct the debtor to pay the outstanding invoice.
Collection is a licensed activity in Finland, and therefore only companies who have been granted the debt collection license by the Regional State Administrative Agency can represent creditor in debt collection measures.
The debt collection process in Finland
Collection activities are roughly divided into extrajudicial and judicial phases. In the extrajudicial phase the main idea is to make debtor to settle the payment voluntarily – that is done for instance by sending the demand letters to debtor or by phone calls. If debtor will not pay voluntarily, the debt collection will proceed to judicial phase which in Finland means a summon application to a district court and after having the court ruling the enforcement procedure.
In the stage of a voluntary collection process the Collection Agency will be sending collection letters and establishes the debtor’s intent to pay. If the letter-based collection process does not yield a result, the case will proceed to the judicial collection process, i.e. the matter will be referred to the competent district court. After the court has awarded a ruling the matter will be sent further to the enforcement authority, which shall launch debt recovery proceedings to recover the debt.
A payment reminder is a notice stating that the invoice has not been paid by the due date. The customer can send a payment reminder themselves, or assign the sending of the payment reminder to the collection agency.
As the payment reminder has already caused the creditor or the collection agency to apply measures requiring costs, the creditor or the collection agency has the right to charge these costs from the debtor.
What is Penalty Interest?
Penalty interest is an interest that the debtor has to pay when the payment has not been made in accordance with the contract by the due date.
How high is the penalty interest?
The rate of the penalty interest is determined in accordance with the Law of Interest Act, and it is the half year reference rate determined by the European Central Bank + 7 percentage points for individuals and for business entities +8 percentage points. The Bank of Finland publishes the approved reference rate and the total penalty interest rate, and the effective term thereof semi-annually, at the end of June and December.
The effective penalty interest rate can be found fromthe following link:
When does the right to charge the penalty interest arise?
The penalty interest may be charged immediately since the first day following the due date.