On Thursday, 8 November, the Saeima adopted in the final reading the Law on Extrajudicial Recovery of Debt, which aims to protect natural persons from aggressive practices of debt recovery, to facilitate voluntary repayment, as well as to give potential lenders a chance to assess a person’s ability to fulfil his or her commitments. Related amendments to the Law on Taxes and Fees that provide for the licencing of debt recovery companies were also adopted in the final reading.

The Law on Extrajudicial Recovery of Debt contains detailed regulations on permissible communication with the debtor, prohibiting aggressive practices such as visiting debtors at their places of employment without their consent, as well providing false information about consequences of failing to repay a debt. 

According to the new law, creditors and debt collectors must use fair communication. Unfair and inappropriate communication involves contacting a person on Sundays and official holidays, during the period from 9 PM until 8 AM or from 9 PM until midnight without the debtor’s consent, as well as hindering the debtor’s ability to use electronic means of communication for everyday communication. Communication with the debtor will be allowed only by the means and contact information indicated in the contract between the creditor and debtor.

Providers of debt collection services will be allowed establish credit history data bases with information on debts that the collector is recovering or has already recovered for a creditor. With the debtor’s consent, third parties will have the right to obtain information from the credit history data base in order to assess a person’s ability to make their payments. Information will be stored in the credit history data base for three years counting from the day of repayment of the debt, fulfilment of liabilities or, if the debt is not repaid, until the end of the prescriptive period of the claim. The law also stipulates what type of information and under what conditions may be included in this data base.

As of 1 February 2013, licencing of debt collection service providers will be implemented, and as of 1 May 2013 debt collectors will be allowed to provide services only if they have licence issued by the Consumer Rights Protection Centre. The state fee for the licence will be LVL 2,500, and the licence will have to be renewed every three years at a cost of LVL 1,000. The requirements for obtaining a licence, the procedure of its issuance, use, suspension, renewal and revocation, as well as the state fee payment procedure, will be determined by the Cabinet of Ministers.

Regulations on extrajudicial debt recovery were necessary in order to obtain comprehensive information about the players in this market, as well as to establish a procedure for extrajudicial debt recovery and to ensure protection of the rights of natural persons in the recovery process. Until now supervision and control of debt collectors was encumbered, and this was the reason for many complaints about the working methods of debt collectors.

Saeima Press Service