Under the draft, debt collectors operating in the credit market would be subject to a number of operational requirements and would have to obtain a license from the Financial Supervisory Authority by June 29, 2024 to continue operating. This would provide the Financial Supervisory Authority with the authority to supervise debt collectors and impose penalties, ranging from injunctions to misdemeanor proceedings, in the event of any problems.

The changes would also bring down the default rate for consumer credit agreements.

"At the moment, the debt collection market in Estonia is rather unregulated and, as a consequence, debtors' interests may not always be protected. In future, debt collectors will have to provide people with clear information on how much they owe and exactly what they will be charged, as well as regarding how to contest a claim made against them," explained Estonian Minister of Finance Mart Võrklaev (Reform).

The minister added, that the number of debtors in Estonia is gradually decreasing, however the increase in the amount of debt and the high number of people subject to enforcement proceedings are both cause for concern. "Enforcement proceedings should be a last resort, however, and now lenders will also have an obligation to consider other ways of restructuring loans before that," the minister said.

According to the draft, debt collection agencies would be required to have a minimum capital of €50,000, and separate rules would be also introduced for the holding of funds received from debtors.

The draft also regulates those, who have prominent roles in debt collection agencies. A person who has a history of excessive borrowing cannot be the manager of a debt collection company for instance.

The draft would transpose into Estonian law the corresponding EU Directive 2021/2167, which regulates the activities of debt collection agencies involved in the recovery and redemption of arrears arising from bank loans. The Directive must be transposed by EU Member States before December 30, 2023, by which time the Act is scheduled to enter into force in Estonia.

As there is currently no specific regulation on debt collectors, there is also no concrete information on the number of debt collecting organizations operating in Estonia. It is estimated that there are currently around ten companies involved in the management and recovery of claims arising from credit agreements.

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