Regulation of abusive informal debt collection practices in Croatia

Abstract

The Croatian economy is, without doubt, one of the weakest in the E.U. and, therefore, Croatian consumer-debtors among the most indebted. The Financial Crisis in 2008 caused the loss of jobs and decrease of personal income and the low resilience of Croatian economy additionally heightened the problems with the repayment of the debt for many of them. At the time, along with the regular judicial path of debt collection, a new path of non-judicial, informal debt collection practices was introduced. It offered creditors a more convenient approach to debt collection, or rather its portion, especially in situations where, due to over-indebtedness, judicial methods had limited or no chance of success. At the same time, it offered no legal protection for consumer-debtors. Although many debt collectors employed aggressive and abusive debt collection practices, due to the absence of sector-specific regulation of informal debt collection in Croatia, these remained non-sanctioned. The chapter starts from the presumption that regulation of informal debt collection practices in Croatia is necessary. Furthermore, it assumes that such regulation would benefit both consumer-debtors and debt collectors, offering more legal certainty to the first and a level playing field to the second. The first part of the chapter provides a brief overview of the current situation of consumer indebtedness in Croatia. It follows with an insight into informal debt collection in Croatia, through a critical analysis of the existing legal framework, an outline of case law and anecdotal evidence of current abusive practices. The chapter also evaluates the traditional statutory, governmental regulation as opposed to the more innovative self-regulation approach. Finally, it concludes whether the regulation of debt collection in Croatia is necessary and the preferable pathways to delivering functional and adequate solutions.