A credit collection agency is a company that, as part of its credit servicing activities, manages and arranges the performance of the credit agreement of a credit institution (a bank) or a creditor (not a bank), the performance of which is delayed, or does so on behalf of the credit purchaser (owner of the credit agreement or the claim arising from it).
According to the Credit Collection and Purchasers Act (hereinafter referred to as the CCPA), most debt collection agencies operating in Estonia must apply for an authorisation from the Estonian Financial Supervision and Resolution Authority (hereinafter the Financial Supervision Authority) in order to operate as a credit collection agency. More specifically, those who engage in the collection or acquisition of debts arising from credit agreements of banks or creditors must apply for an authorisation. Collection agencies that only collect fines or maintenance arrears, for example, do not need to apply for an authorisation.
Applying for authorisation of credit collection agencies
The members of the management board of the company that intends to operate as a credit collection agency (hereinafter the applicant) must submit a written application and the following documents and information specified in the CCPA to the Financial Supervision Authority:
- a copy of the articles of association or a resolution of the general meeting of shareholders concerning the amendment of the articles of association and the amended text of the articles of association;
- a business plan that complies with the requirements of section 8 of the CCPA;
- the amount of the share capital and documents proving its payment;
- the address of the applicant’s head office or registered office;
- information about the applicant’s members of the management board and, if available, members of the supervisory board (members of the management board or supervisory board are hereinafter referred to as managers) in accordance with the provisions of subsections 39 (1) and (5) of the CCPA;
- in the case of managers and persons with a qualifying holding in the applicant, an extract from the criminal records database; in the case of a foreign national, an extract from the criminal records database of their country of origin or an equivalent document issued by a competent judicial or administrative authority, and this extract may not be older than three months;
- data specified in section 29 of the CCPA with regard to persons who have a qualifying holding in the applicant;
- internal rules complying with the requirements set out in sections 41 and 42 of the CCPA, including the internal accounting rules and the procedure for the operation of the internal control system;
- internal procedures for registering and resolving borrowers’ complaints in accordance with the requirements set out in section 60 of the CCPA;
- where applicable, the outsourcing agreement entered into with a credit servicer;
- information about the applicant’s audit firm and internal auditor, including the name, place of residence or location, personal identification code or, in the absence thereof, date and place of birth or registry code of each of them;
- the description of the structure of the organisation, including, where necessary, the description of the procedure for the outsourcing of the activities of the credit collection agency;
- the description of the information systems and other technological means needed for the provision of the planned services;
- information on whether the applicant wishes to receive and hold borrowers’ funds;
- proof of payment of the processing fee set out in subsection 453 (2) of the Financial Supervision Authority Act.
If the applicant wishes to receive and hold borrowers’ funds, they must submit the details of a payment account complying with the requirements provided for in section 47 of the CCPA.
The details of managers must be provided to the Financial Supervision Authority via the fit and proper assessment form.
The application to be submitted to the Financial Supervision Authority must be in Estonian. If the applicant wants to submit other documents related to the procedure in English, the corresponding wish must be clearly stated in the application. The Financial Supervision Authority has the right, but not the obligation, to take the applicant’s request into consideration.
The Financial Supervision Authority may demand the submission of additional information and documents if it is not convinced, based on the submitted information, as to whether the applicant for an authorisation has adequate opportunities to operate as a credit collection agency, whether they meet the requirements established by legislation, or whether other circumstances relating to the applicant need to be verified.
Time limit of proceedings
Companies that already operated as collection agencies on the credit market before the entry into force of the CCPA must apply for an authorisation from the Financial Supervision Authority and bring their activities and documents into compliance with the law by 31 December 2024 at the latest. Otherwise, they must stop operating as credit collection agencies on the credit market.
The authorisation proceedings of credit collection agencies take three to six months. The Financial Supervision Authority makes a decision to grant or refuse to grant authorisation within three months of submission of all the necessary documents and information that meet the requirements, but not later than within six months of submission of the application for authorisation.
Processing fee
The processing fee payable when applying for the authorisation of a credit collection agency is 3000 euros.