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Cross-Border Collection on the Dangerous Peninsula

Like many people, for me the word Scandinavia is associated with peace, nature, and relaxed holidays. But as someone responsible for international debt collection, these pleasant connotations are quickly blocked out by thoughts of the various regulations and laws that have to be considered in the different Nordic countries. In this sense, I can get behind the linguistic finding that Scandinavia originally meant “dangerous peninsula”.

In fact, there are considerable differences between the “Nordics” – a collective term that we use to refer to Denmark, Finland, Norway, and Sweden for simplicity. This not only concerns the mentality, but also the language – particularly Finnish or Suomi, which is closely related to Hungarian. In terms of international debt collection, there are also various regulations regarding fees, deadlines, and other aspects that make the region “dangerous”. This starts with the local requirements for the pre-collection process, where key steps have to be taken and data collected that are crucial for debt collection.

More than natural beauty – an attractive economic area

Before we continue, I’d first like to give our Nordic neighbors a compliment. All four countries regularly appear in the top 10 lists when it comes to national reputation (see the Reputation Institute, Country RepTrack). These ratings include both the attractiveness for tourists as well as for companies and investors. The region is not only a popular destination for holidaymakers, but is also certainly of interest for economic activity. This is true for companies from the region that wish to enter neighboring countries, as well as companies from other countries.

For companies looking to expand their operations into the Scandinavian region, I can pass on an observation that undoubtedly not only applies to debt collection: Despite their close proximity, these countries are very different!

Insights in the Nordic jungle

The word jungle is not perhaps the first that springs to mind when I think of the magnificent scenery in the northern European states. With respect to the different legislation, however, you will quickly find yourself in a legal jungle of paragraphs and clauses. So, I’d like to offer a little insight here.

Let’s start with the good news – in terms of debt collection, there is one commonality: In all four countries, debt collection fees can be charged to the debtor. But that’s pretty much where the similarities end.

In Sweden, dunning fees are set to SEK 60 (around €5.50). In Denmark, late payers can expect to pay far more. Although the maximum dunning fee is also defined by law here, it amounts to DKK 100 (around €13.00) per reminder and may be charged three times at most. By contrast, light and severe collection fees are charged in Norway. In other words, a fee is defined for the first dunning notice, which automatically doubles after 28 days if it is not paid. However, the amount of the dunning fee permitted by law is currently being discussed and is likely to fall significantly. That represents yet another challenge for international debt collection: Laws, regulations, and rules are never static and always have to be monitored for all the relevant countries to ensure legally compliant and efficient collection.

Sweden and Finland are ideal candidates for debt collection, since everyone here has a social security number (SSN) that can be requested during order submission and account creation. This allows defaulting payers to be easily identified via the SSN. The equivalent to the SSN in Denmark is the CPR number (Central Person Register), but its use in invoicing and collection is not clearly regulated by law. Smart approaches in international debt collection also need to be defined and implemented for these legal gray areas.

The list of differences and idiosyncrasies is almost endless – so we can’t cover all the details here. Instead, I’d like to raise awareness for the complexity of international debt collection among companies that are planning or have already started an expansion of their business activities. After all, good results can only be achieved in receivables management in each country following diligent planning.

A danger recognized is a danger averted?

The general question that companies face when operating in Nordic countries is therefore: How should I handle the topic of “international debt collection”? This naturally raises a number of follow-up questions like:

  • Do I already have the necessary know-how and resources?
  • Do I need to set up and run my own cross-border collection?
  • Should I look for a national debt collection service provider for each country?
  • How costly is it to search for and continuously monitor these service providers?
  • How can I send my documents quickly and securely?
  • How can I maintain an overview of the most important figures?
  • Can selling receivables also be a suitable (supplementary) measure?

At Arvato Financial Solutions, we have already thought about all these questions. With CrossCollect, we have developed a comprehensive solution for international debt collection – and not only for business on the “dangerous peninsula”. We can also add many other countries to our systems – immediately or gradually as needed – and work with local expertise.

Do you have any more questions or wish to discuss the current challenges your company faces in national or international debt collection? Please get in touch with us.

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