"Now it will be ensured that the operations of debt collection agencies become more transparent and that debtors are not unduly pressured," Finance Minister Mart Võrklaev said.

Debtors will be subject to notification obligations. "Debtors must be provided with clear and simple information about exactly what is being demanded of them and how much their debt amounts to, including both the debt itself and interest. Additionally, clear information on how to dispute the claim must be provided. This will give debtors better opportunities to defend their interests," explained Thomas Auväärt, deputy head of the financial services policy department.

In addition to the aforementioned obligation to provide information, debt collection agencies must act in good faith, fairly and professionally. They must also respect and protect debtors' personal data and privacy and communicate with debtors in a manner that does not constitute harassment, coercion or undue influence.

New requirements will also be introduced for the managers and owners of debt collection firms – for example, a person who has previously engaged in usury cannot be the manager of a debt collection firm. The minimum capital requirement for debt collection firms will be higher than for regular companies – €25,000.

The draft law also sets additional requirements for banks and other creditors – stating that before initiating enforcement proceedings, the creditor must consider whether there are possibilities to modify consumer credit agreements that have exceeded payment deadlines in such a way that the debtor would be able to pay off the debt in the longer term and avoid court proceedings.

Business entities operating in the credit market as debt collectors must obtain the relevant operating license from the Financial Supervision Authority by December 31, 2024. This will also give the FSA the right to supervise debt collection firms and, in case of problems, to use sanctions ranging from orders to misdemeanor procedures.

In Estonia, approximately a dozen companies, or the majority of the debt collection firms established and operating in the country, deal with the management and collection of claims arising from credit agreements. Therefore, the law will regulate a larger portion of the Estonian debt collection market in the future.

--

Follow ERR News on Facebook and Twitter and never miss an update!