Hamburg Higher Regional Court slaps fictitious costs “around the ears” of debt collection industry

Artificial collection costs: vzbv successfully sues EOS Investment GmbH

EOS Investment GmbH, a debt collection company that collects outstanding debts for the Otto Group, was sued by the Federation of German Consumer Organisations (vzbv) for generating artificial collection costs. The Hanseatic Higher Regional Court (OLG) of Hamburg has now ruled in favor of consumers and determined that EOS Investment may not charge consumers for the costs of commissioning the debt collection activity.

The ruling, which was pronounced on June 15, 2023, directly concerns 15 individual cases in which unpaid claims against consumers were transferred to EOS Investment GmbH by Otto Group companies or companies outside the Group and asserted on behalf of the defendant by EOS Deutscher Inkasso-Dienst GmbH (EOS DID) in 2020/21.

The court found that the costs that EOS Investment claimed for engaging EOS DID did not constitute compensable damages for delay. These 15 consumers therefore do not have to pay the collection costs demanded of them and may be able to reclaim any payments already made.

However, the judgment is not yet final. Due to the fundamental importance of the matter, the Higher Regional Court allowed an appeal, which – if the defendant avails itself of this option – would have to be decided by the Federal Court of Justice.

The ruling also has implications for consumers who have registered in the register of complaints kept by the Federal Office of Justice, insofar as their cases are of the same nature. Prior to the hearing, a total of around 680 consumers had filed their own claims or legal relationships for entry in the register of actions for the model declaratory judgment proceedings in this case.

These proceedings are the first model declaratory judgment action to be brought before the Hanseatic Higher Regional Court since its introduction on November 1, 2018. The model declaratory action makes it possible to clarify legal issues that are significant for a large number of legal relationships in a model case. It is intended to compensate for the fact that it is often too burdensome for consumers to pursue claims for damages or reimbursement individually if the disadvantage suffered in the individual case is minor.

Ruling with signal effect: Change in the collection industry and beyond

The ruling has a signal effect for the entire industry. It shows that companies must not enrich themselves at the expense of consumers and that artificially increased costs by collection agencies are not permissible. This could lead to other companies having to rethink and change their practices as well.

EOS Investment GmbH, part of the EOS Group and one of the largest players in the German debt collection market, has in the past taken over receivables from other companies, including the Otto Group, and enforced them through EOS Deutscher Inkasso-Dienst GmbH (EOS DID). This internal assignment within the Group artificially inflated costs, resulting in higher collection costs for consumers.

The Hamburg Higher Regional Court has now prohibited this practice and ruled that the costs incurred by this type of commissioning may not be passed on to consumers. This means that EOS Investment will have to bear the costs of this type of debt collection itself in the future.

This ruling could also have a fundamental impact on other industries. Particularly in cases of many warning letters or the collection of other claims, the question could arise in the future as to the extent to which costs are to be reimbursed, some of which have never been incurred by the respective law firms or – at least unofficially – should only be incurred if the warning letter etc. was successful.

It is important to emphasize that the verdict is not yet final and that EOS Investment GmbH has one month from the date of service of the written reasons for the verdict to appeal to the Federal Court of Justice.

Conclusion: Consumer rights strengthened, but final decision still pending

The ruling by the Hamburg Higher Regional Court marks an important step for consumer rights. If it becomes final, consumers who have registered and participated in the lawsuit can invoke the judgment and reclaim any payments made. This could help them fight back against unfair practices.

However, EOS Investment GmbH has announced that it will appeal against the ruling. It argues that the ruling violates essential basic principles of German tort law. In the company’s view, the Higher Regional Court disregarded essential points, in particular the fact that there had been a delay in payment in all cases. EOS Investment GmbH is of the opinion that the costs incurred in processing these claims should be borne by the defaulting payer, as the latter has not fulfilled its obligation to pay on time.

It remains to be seen how the Federal Court of Justice, which is not expected to rule on the appeal until next year at the earliest, will evaluate these arguments. Regardless of the outcome, however, this case underscores the importance of consumer rights and the need to protect them against companies that try to pass their costs on to consumers.