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Lenders and credit brokers in the Netherlands beware! With the entry into force, on 1 April 2024, of the Quality of Debt Collection Services Act (Wet kwaliteit incassodienstverlening) and the Quality of Debt Collection Services Decree (Besluit kwaliteit incassodienstverlening), parties that perform or provide extrajudicial debt collection services are required to apply to screening authority Justis ("Justis") for registration. As a result, the new Act's quality-linked obligations have now also become applicable, with supervision being assigned to the Inspectorate of Justice and Security (the "Inspectorate"). For licensed lenders and credit brokers, the obligations from the Act apply on top of the requirements to have a licence from the Dutch Authority for the Financial Markets ("AFM") for credit-related services and to comply with the applicable provisions under the Financial Supervision Act (Wet op het financieel toezicht).

VAST 2024 / B-014, Lisanne Haarman, Gijs Hamelijnck en Willianna Veldhuijsen, e-ISSN 2667-307X, M.A.D.Lex

Consequences of the new Act

Now that the new Act has entered into force, lenders and credit brokers will be supervised by both the AFM and the Inspectorate. The legislature has explicitly acknowledged that the licensing obligation and the obligatory registration will exist side by side. 

In this article, we will confine ourselves to the consequences of the Act for licensed lenders and credit brokers that also perform or provide extrajudicial debt collection services. The topics covered are background and purpose, scope, rules and procedures for registration, sanctions, supervisory authorities and transitional rules under the Act. 

Background and purpose

Scope

Under the new Act, extrajudicial debt collection means any activity to obtain payment of a claim for a sum of money, without bringing legal proceedings. The scope of the new Act extends to all work associated with debt collection, from the moment that a debt collector undertakes steps to collect a claim for payment during the extrajudicial phase, acting on behalf of another party or after the claim has been handed off (or factored), in the course of a profession or business that is aimed at such work. The debt collection must be aimed at natural persons in the Netherlands. Natural persons also include sole proprietorships and general partnerships, as with these legal forms the business owner is personally liable and creditors can enforce their claims against the business owner's personal assets. The new Act does not apply to situations where a party acts to recover their own claims. 

If a credit broker also collects claims on a lender's behalf, and so helps to manage the loans, the broker not only requires a licence under the Financial Supervision Act but also falls within the scope of the new Act. The new Act applies to all lenders and credit brokers that perform or provide debt collection services in the Netherlands aimed at natural persons, regardless of where the lenders and credit brokers have their corporate seat. 

Rules and procedures for registration

To perform or provide extrajudicial debt collection services, the debt collector must first be listed in the register. This means that any lender or credit broker that wishes to perform or provide debt collection services must apply to Justis for registration. The application must provide a description of what the debt collector will do to comply with the rules for carrying out the work (which include stating the registration reference during collection work), and the rules for staff (attending courses to refresh professional skills, for instance). The debt collector's address details, contact information and trade names and the names of its board members must also be provided, assuming that this information is not already available in the Business Register. 

In addition, the reliability of both the applying entity and its board members will be reviewed as part of the registration. Policymakers and anyone involved in policymaking, including sole shareholders, will also be registered and have their reliability reviewed. Board members may not actively carry out work before registration is complete.

When carrying out any debt collection services, the entity must use the registered name, and also disclose the registration reference obtained when it registered and the contact information and address details listed in the register. Debt collection is moreover only permitted after the debtor has been given advance warning. Every member of staff who performs or provides the debt collection services, and who is therefore entrusted with contact with debtors and creditors, must have a certificate of conduct issued no more than three months previously. This means that they must first present their certificate of conduct before they may actively carry out any of these duties. The above also applies to the persons supervising these members of staff. These members of staff are required to regularly refresh their professional skills, including their knowledge of current laws and regulations on extrajudicial debt collection services, the GDPR and how to handle problem debt in their work.

The debt collector must make sure that the details of the claims are clear and easy to understand, for both the debtor and the creditor. They should provide the debtor and the creditor with all relevant information and adopt a professional attitude. This means not using threats or intimidation in communications, only communicating at normal times, not threatening particular powers, and making allowance for the debtor's position.
The debt collector should have a website containing all the necessary information. Required information includes the registration reference, the appropriate office, contact and email addresses, hours of business, telephone availability, possible methods of payment, how to go about making a payment plan, what the complaints and disputes procedures are, and possible agencies for referral, such as debt counselling.

The debt collector must also maintain proper accounts and records, with a clear overview of the number of claims and the status of the collection process at all times. In addition, the business set-up should be designed with a simple organisational structure with separated duties, powers and responsibilities and clear reporting lines. It must also include procedures and measures to safeguard confidentiality and integrity of information, and to ensure the uninterrupted availability and security of automated data processing. The debt collector is also required to have a complaints procedure, and to be registered with a dispute resolution authority. As for the debt collection costs to be charged, the rules from the Extrajudicial Collection Costs (Fees) Decree continue to apply.

Sanctions

The Inspectorate will use the first year after the new Act enters into force to gradually phase in its compliance supervision. This will provide information about the scope and nature of the abuses and the types of companies where risks are most common. The next step will be to establish the structural form for the supervision, drawing on input from Justis and other relevant supervisory authorities (including the AFM). The supervision will focus chiefly on compliance with the quality requirements and other obligations under the new Act. Possibilities are provided for administrative-law sanctions, to penalise debt collectors (both registered and unregistered) that fail to comply with the new Act. The Inspectorate can impose four types of sanctions: (i) orders subject to penalties; (ii) administrative penalties for amounts ranging from EUR 435 to EUR 21,750 and in exceptional cases even EUR 87,000; (iii) suspension of the debt collector's registration; and (iv) cancellation of the debt collector's registration. Another rule is that, if the debt collector is not registered or its registration has been suspended, the debtor is not required to fulfil any payment requests from that debt collector. 

Supervisory authorities 

Licensed lenders and credit brokers are subject to supervision by the AFM. With the introduction of the new Act, if they perform or provide extrajudicial debt collection services as well, they will also be supervised by the Inspectorate. The new Act provides for a duty of notification between separate supervisory authorities: the AFM must notify the Inspectorate of any violations of the new Act, and the Inspectorate must inform the AFM of any violations of the Financial Supervision Act. The new Act also imposes an obligation on all supervisory authorities involved with the new legislation (Netherlands Authority for Consumers and Markets, AFM, Justis, the Inspectorate, the Dean of the Netherlands Bar and the Financial Supervision Office) to draft a cooperation protocol. It furthermore provides for the opportunity (subject to specific conditions) to exchange their acquired data and information concerning a party that performs or provides extrajudicial debt collection services.

Transitional period 

Existing lenders and credit brokers may continue their extrajudicial debt collection services for one year after the new Act enters into force as though they were registered, if they have performed these services without interruption since before the new Act gained force of law. They must apply for registration within one year of the new Act's entry into force to be allowed to continue their services. In other words, the decision on the registration request need not be obtained within one year. This grace period does not extend to parties not already performing or providing extrajudicial debt collection services before the new Act entered into force: they may only perform or provide extrajudicial debt collection services after they apply for registration and their application has met with a favourable decision.